Salceda says barter trade ‘valid form of sale’

Salceda said the barter system allows an efficient exchange of goods even when parties do not have cash. (File photo: Joey Sarte Salceda/Facebook)

MANILA – Albay Rep. Joey Salceda on Wednesday said barter trade is recognized as a valid form of sale under existing laws.

Salceda, chairman of the House Ways and Means Committee, made the statement after the Department of Trade and Industry (DTI) said it will implement a crackdown on online barter trading, which has become prevalent during the community quarantine period.

“Barter trade is recognized as a valid form of sale. The Civil Code explicitly recognizes barter as falling within its purview and governed by provisions on sales. The Code even sets the obligations of parties in a barter trade, as well as their rights. For all intents and purposes, barter is a legitimate form of trade,” Salceda said.

Salceda said the barter system allows an efficient exchange of goods even when parties do not have cash.

“Because barter trade is the most basic form of trade, and can take place even without cash, it allows the exchanging parties to have access to goods that have more economic utility to them than the good they are willing to exchange,” he said.

He noted that even goods that have already depreciated their cash value could still be exchanged for goods of similar cash value, but are of higher economic utility to the parties involved.

Salceda cited as an example a bartering party receiving a frying wok in exchange for an old bicycle.

He said when the receiver of the wok is able to sell fried fishballs with it, while the receiver of the bicycle is able to go to work with it, then bartering creates gross domestic product (GDP) out of capital goods that would probably have depreciated to zero in cash value if they were never exchanged.

“This gives barter trade high multiplier effects. It is difficult to estimate the value of all barter trades as a share of GDP, but they are estimated to be anywhere between 5 to 60 percent of transitional economies like ours,” he said.

He also stressed that enforcing taxes due from barter trade may be a tedious process especially amid the coronavirus pandemic.

“How taxes will be enforced on barter sale is, at best, ambiguous. The most obvious applicable tax would probably be the Value-Added Tax, but this applies to all VAT-registered persons. This means that, if VAT were to be very strictly imposed on barter trade online, most of these trades are probably exempt anyway,” he said.

Salceda argued that it is also inaccurate to claim that Executive Order 64 of 2018 prohibited barter trade elsewhere.

“What the Executive Order does is explicitly allow transborder barter trade in key ports in the Bangsamoro Region, in recognition of old trade mechanisms in place in the region, and to promote economic opportunities and livelihood among the region’s people. The EO does not make any provision, prohibitive or otherwise, for any other region,” he said.

DTI Secretary Ramon Lopez has clarified his recent statement that ‘online barter’ is illegal, saying exchanges of goods for personal transactions, not as business, is allowed.

Citing the EO, Lopez said barter trade is only allowed in three areas in the country — Siasi, Jolo; Sulu and Bonggao, Tawi-Tawi.

“Outside those areas, barter trading across borders is not allowed. This is what I meant as illegal if done in other areas, or if done online and cross border and as a regular business, in (the) course of trade and not registered, not taxed,” he said.

Lopez said local barter trade is subject to regulation, noting that it should be registered and is subject to tax if done in the course of business.

Lopez further said this is also applicable to online transactions.

Barters with annual gross sales of PHP3 million are exempted from paying value-added tax, he said.

“However, personal transactions, not in the course of trade and business, are not covered by registration requirements,” he added.