Globally, the spa and wellness industry was estimated to be at $3.4 trillion as per a report compiled by SRI International. In America, the spas and beauty salon industry stood at $85 billion in 2013 but is predicted to reach $138 billion by 2020, states a Transparency Market Research Report. By one estimate, the beauty and personal care market in India is worth $11.6 billion and is growing by 13 percent annually.
Pakistan has its big players and trend setters such as Toni & Guy, SABS, and Nabila’s and then it has the smaller players, the small setup of beauty parlours that are there in every nook and cranny. Though under the purview of the Ministry of Industries, it is a sector that has gone largely unnoticed.
Beauty parlours falling below the radar is problematic on several levels. A report by commissioned by SBP indicates that 40 percent of the parlours provide in-house training, many of whom use unlicensed or imitation products which cause skin diseases, especially in the rural areas. To address this issue, beauty parlours in Punjab have been given the status of the industry with all of establishments asked to register. Women working in those parlours are to be given training to prevent the spread of diseases like Hepatitis B and C, HIV, AIDS and Thalassaemia.
However, implementation is an issue since many of the establishments are operated out of households. 2005 census of economic establishment put the figure of household establishments offering beauty salon services (among others) at 1.4 percent but acknowledges it as a highly underestimated figure since many respondents’ hid activities to avoid tax.
Financial data available on beauty parlours is extremely skewed on one or the other side of the spectrum. On one hand, the average annual revenue per establishment is estimated at Rs20 million by the SBP commission report, indicating that an average parlour earns over Rs1.5 million a month. A ridiculously high number. On the other hand, the Punjab Revenue Authority (PRA) earns Rs4-8 million in revenue from its 287 registered salons, which means on average a salon pay Rs21,000 in taxes annually. PRA estimates that there are 2,000 salons in Lahore alone which indicates that even with conservative numbers, there is at least tax revenue of Rs42 million that FBR is losing out on.
It is hard to quantify the number of beauty parlours and salons for men and women in the country. In an attempt to widen the net, the PRA has developed an invoice monitoring system for parlours running in the country. As an incentive, it has offered a tax reduction from 16 percent to 5 percent for those who opt for the invoice monitoring system. However, for those not paying taxes at all there is little incentive to start paying taxes.
Admittedly, many parlours are small affairs operating out of households. But the SBP reports indicates that 56 percent of the respondents had parlours employing 10-24 people therefore indicative of revenues that are taxable.
The lack of documentation or data on beauty parlours allows them to continue unregulated and hence potential sources of diseases. Without financial tabs, it is hard to tabulate how big the industry is but given global and regional indicators and domestic data, it can be safely said that Pakistan is losing out on tens of millions of rupees of tax revenue at the very least.
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