Avon Romania, the biggest cosmetics direct selling company, hasstrongly felt the impact of the VAT raise by five percent,announcing that the turnover growth rate, by around 13.5% in RON,recorded in 2009, will go down this year because people are buyingcheaper products.
"The VAT hike and the measures taken by the government over thelast two months have had a three-level negative impact on Avon'sbusiness. Firstly it affected our profitability because we keptprices unchanged, the 5% difference was covered by the company.Secondly, as incomes declined, people started to buy cheaperproducts, and thirdly, the new legislation on taxation of soletraders (PFA, PFI) has led some Avon representatives to suspendtheir activity," Razvan Diratian, commercial manager of AvonRomania and Bulgaria told ZF, attempting a brief account of thelast three months' performance.
The American cosmetics company, which posted 113 million euros(474.7 million RON) in turnover in 2009, similar in euros to the2008 level, has, apart from direct customers, 9,000 independentcontractors working based on a professional certification and afurther 1,600 sole traders. Under the new legislation, they need tocontribute to the pension, health, and unemployment fund similarlyto people that collect royalties, the difference being that forsole traders and of independent contractors the taxable amount isthe net profit. Direct selling companies work with the biggestnumber of independent contractors.
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