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A Beautiful Business Opportunity; Give Tax Reform A Chance
By FRANCISCO JAVIER CIMADEVILLA
April 22, 2004
A beautiful business opportunity: Beauty is big business in Puerto Rico, and it is certain to become even more so in the years to come.
Not that long ago, the beauty industry on the island was limited to cosmetics and fragrance counters at local pharmacies and department stores. Beauty parlors were relatively small locales for women exclusively to have their hair fixed and their nails done.
Not any more. The retail beauty industry has grown and continues to grow by leaps and bounds, and has become more sophisticated than anyone could have foreseen a few years ago. And it no longer caters exclusively to women. Men have become avid consumers of beauty products and services, giving the industry a whole new market to develop and exploit.
The variety of cosmetics, fragrances, hair & skin treatments, and other beauty products for both men and women has grown to mind-boggling proportions.
So have the services: In the past few years, being beautiful has also come to mean being fit and healthy. Gyms for both men and women have become big business. And a number of spas and wellness centers that combine healthy dietary regimes with exercises and massage have sprung up all over the island.
The local market for beauty-related medical procedures has also grown tremendously. The cosmetic surgical procedures to which only a privileged few had access in the 70s have become commonplace.
The mainstay of the beauty industry continues to be womens cosmetics. According to sources, local sales by major cosmetics companies, such as LOreal, Estee Lauder, and Ebel, surpass $200 million a year. That figure continues to grow, with most of them reporting double-digit growth every year.
Not only that. Compared with other markets, Puerto Rico stands out in terms of sales per consumer. LOreal, for example, reported that consolidated sales from Puerto Rico are higher than from larger markets such as Venezuela and Colombia.
Locally, the beauty industry has become an area of opportunity for more and more small businesses. It used to be that, with few exceptions, perfumes and cosmetics were sold only in anchor department stores in shopping malls. Today, one sees many small stores, salons, and even kiosks or carts devoted solely to beauty products.
Looking good and feeling healthy will continue to score high on the list of priorities of local consumers, and therefore will continue to represent a great business opportunity for both large and small companies in Puerto Rico.
Give tax reform a chance
The long-awaited tax reform study released last week (CB April 15) by the local State Society of Certified Public Accountants (CPAs) deserves careful consideration and action.
After weighing the pros and cons of the sales tax and value-added tax (VAT) systems, the study calls for replacing our current excise tax (arbitrios) system with a sales tax. Among other things, the CPAs noted that a sales tax could be implemented faster and would be more economical to administer than a VAT.
In our view, the important thing is the consensus that has been reached in the past couple of years among tax experts, private-sector business associations, economists, and government officials about the desirability of replacing the awkward and arcane 6.6% arbitrios system with a point-of-sale tax.
Even more important, we take heart from the repeated statements of Treasury Secretary Juan Flores Galarza and others that the move would be accompanied by a revamp of our present income tax structure to ensure the middle class doesnt get squished.
At this point, it would be fanciful to expect the present administration and Legislature to move on such an important and complex matter in an election year. But we expect the next administration and the next Legislature to act promptly on it for the good of Puerto Rico.
This Caribbean Business article appears courtesy of Casiano Communications.