A tax reform empowering women

The hard work of a hardware store owner

Colorful stands of fruit line the streets, the tang of assorted spices fills the air, tuk tuk taxis flutter along dirt roads in orderly chaos, and vendors scurry to open up shop for eager customers. This is Mercado Mayorista—a market located in the heart of Cañete province, 70 miles outside of Lima, Peru. It is here that Verónica Canales started her small business—a hardware store named Distribuidora Central. Verónica knew she would have to work twice as hard to break into an industry traditionally dominated by men, and regulatory hurdles only added to the burden, but her entrepreneurial skills helped with the first problem, and an Atlas Network partner helped with the second.

An out-of-order tax system

Verónica knew her product from years of working in a hardware store, and she knew exactly what her clients would need—screwdrivers, wrenches, plumbing supplies, paint—everything you’d expect to find in any well-stocked home improvement store. More importantly, she was familiar with her supply chain and knew that she could provide quality products at fair prices. In a competitive market, Verónica wanted to be able to keep her head above water.

That was complicated by burdensome government rules. For years, the government required business owners to pay taxes long before they received payment from those purchasing their products—making it impossible to produce steady revenue. This system was so complex that many businesses either operated illegally or refused to expand in order to avoid the crushing financial burden that the formal economy placed on them.

Fixing taxation so entrepreneurs can thrive

Because of challenges like these, Verónica never imagined she could start her very own business. Never, that is, until she connected with José Ignacio Beteta and his organization, Asociación de Contribuyentes del Perú, a Lima-based taxpayer watchdog and Atlas Network partner dedicated to helping people such as Verónica.

Beteta and his team at Asociación de Contribuyentes del Perú had seen firsthand how entrepreneurs were struggling with tax issues, and they stepped in to help. Aided by US$18,000 from Atlas Network and working directly with the Peruvian government’s tax agency, Superintendencia Nacional de Administración Tributaria (SUNAT), they advocated for simple, effective solutions that could help small business owners like Verónica.

“For small businesses, paying taxes is a huge burden,” says Beteta, president of Asociación de Contribuyentes del Perú. “It’s not only because some taxes are excessive but because the payment process is difficult and tiring.”

A voice for victims

After years of sitting at the table with decision-makers and discussing topics, reforms, and recommendations, Beteta’s think tank became the voice for small businesses victimized by the harsh tax code. With their help, the Peruvian government decided to let business owners pay their taxes after they have received payment for their products.

Empowered by this reform, Verónica participated in “Impulsa Perú,” a program promoted by José’s team that focused on empowering small businesses and start-ups by helping them navigate the tax system. She took full advantage of the opportunity and used her knowledge of products, clients, and suppliers to open up her small storefront in 2017.

Empowering a community

While this tax reform seems like an obvious and simple solution, it has changed the lives of many current and aspiring business owners in Peru. Thanks to the work of Asociación de Contribuyentes del Perú, Verónica and other small business owners are thriving in a more business-friendly climate. And Mercado Mayorista—where florists, toy stores, butcher shops, hardware suppliers, and dozens of small businesses are taking root—is a hub for their community.