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.
The huge market consists of a range of goods from animal products to clothes. Those hankering for fresh ingredients can choose from aisles and aisles of selections. Meanwhile, there’s plenty to look at for those who are just wandering through, like handcrafted shoes, jewelry, and Peruvian knick knacks.
To the average outsider, this market seems like any other. In reality, this enormous example of small-scale commerce was impossible until very recently. Mercado Mayorista is a byproduct of the recently revamped Peruvian tax code.
“For small businesses, paying taxes is a huge burden,” says José Ignacio Beteta, president of the Lima-based Asociación de Contribuyentes del Perú, a taxpayer watchdog organization that was heavily involved in the reforms that led to the changes. “It’s not only because some taxes are excessive but because the payment process is difficult and tiring.”
One of the stores in Mercado Mayorista is Distribuidora Central, a hardware store owned by Verónica Canales, who is one of the many beneficiaries of the tax code change.
The high cost of maintaining a business in Peru is already burdensome, but for a woman owning a hardware store—a profession mostly dominated by men—Verónica knew that she would have to put in double the work in order to succeed.
The high cost of maintaining a business in Peru is already burdensome, but for a woman owning a hardware store—a profession mostly dominated by men—Verónica knew that she would have to put in double the work in order to succeed. Still, she had a passion for her work. She 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. However, she never imagined she could start up her very own business until she connected with José’s team and used her knowledge of products, clients, and suppliers to open up her small storefront in 2017.
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. Previously, 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.
“It’s onerous and unfair,” points out José.
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.
José 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. 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.
After years of sitting at the table with decisionmakers and discussing topics, reforms, and recommendations, José’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.
While this solution seems like an obvious and simple reform, 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.