Earning backlash from Senate President Pro Tempore Ralph Recto and various barter groups on calling trade-offs as ‘illegal’, Department of Trade and Industry (DTI) Secretary Ramon Lopez, in a statement released Wednesday, clarified that he was referring to barters done online and cross border, or in the regular course of business, not on personal transactions and areas where barter is allowed.

DTI stressed that “personal transactions not in the course of trade and business are not covered by registration requirements.”

In addition, Lopez cites Executive Order (EO) No. 64, signed by President Rodrigo Roa Duterte in 2018, that only allows barter trades in three areas in Mindanao – Siasi and Jolo in Sulu, and Bongao in Tawi-Tawi.

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

Meanwhile, local barter trades, without a clear prohibition, are subject to regulation and must be taxed.

DTI further emphasized that local trades are “subject to tax if it is being done in the course of regular trade or business.”

He added that the same goes for online transactions.

“However, local barter trade activities with less than Php3 million gross sales per year may avail of value added tax (VAT) exemption.”

Lopez’s clarificatory statement on online barter was released after Recto, together with citizens belonging in barter communities around the country expressed their disapproval, asserting that barter does not breach any law.

Recto, barter groups on DTI taxing ‘illegal’ trade-offs

In a statement released, Recto emphasized that the DTI should “barter its off-the-cuff statement with common sense, and exchange it with a clarificatory statement that no law is being violated by neighbors swapping goods in the community chat group.”

“When you exchange a tax-paid shirt too small for you for tax-paid shorts too big for your friend, where is the revenue loss for the government?”

Recto said that money is not always the medium of exchange in villages as bartering is a fixture of life in the rurals, offering a bag of rice to a basket of vegetables.

As the pandemic continues, Recto stated that people are doing barter not to get rich but to get by.

“To survive the economic crunch of the lockdown, people are bartering unused and surplus household items, not to monetize them, but for goods they need. Previously loved items are being rehomed.

Meanwhile, founder of Bacolod Barter Community Atty. Jocelle Batapa-Sigue stressed that there is no clear and specific basis for DTI to declare barter platforms as unlawful.

Batapa-Sigue recognized barter under the Civil Code of the Philippines since 1950, stating that online barter platforms are not engaged in business, selling or promoting business and activities that are aimed to evade tax laws.

“Our collective definition of barter is exchanging personal goods and personal services based on the mutual and voluntary decision of two persons for their personal use and consumption,” Batapa-Sigue clarified.

She added that the items involved in barters are not exchanged based on cash or price, as well as not a donation for the goods are not given without anything in exchange.

As the country suffers from poverty and joblessness due to the worsening economic situation, the founder of the barter community appealed to the DTI to help find solutions instead.

“We appeal for you to focus on the things that are important. All the barter communities are willing to help restore what we all lost,” she said.

Sharing the same sentiments with BBC, Davao Barter Community [Official] (DBCO) in its official statement, also cited Article 1638-1641 of the Civil Code of the Philippines which allows barter as a medium of exchange between two contracting, consenting parties.

The barter community, which has over 150,000 members, will “just await the final resolution of the government on the said matter, when appropriate regulations are defined and made known to the general public.”

“In the meantime, DBCO will continue serving the people of Davao since we believe that bartering, especially in these most trying times, has helped a lot of our ka-DABAWters — the very essence of this group — Davaoeño para sa Davaoeño,” the statement read.

For DBCO member Janyssa Mariae Buenafe – Paña, DTI’s pronouncement of barter as illegal was confusing and unclear because based on her research, the barter community does not violate any law.

Buenafe-Paña said that the imposition of tax on bartered items would cause an “additional ‘burden’ financially to both parties who will do the barter.”

She further implied that people who engage in barter trades would be left with no choice but to stop in transacting.

“If taxes would be imposed on barter trades, it simply implies that the nature and beauty of barter will no longer be practiced. It will discourage people engaging the barter community and would consider buying new items rather than doing barters,” the senior high school teacher said.

Furthermore, ADDU Accountancy student Harry Jan Lois Cacdac believes that Lopez’s statement was intended for large-scale transactions and for those who make barter trading as businesses, not for small-scale barters he participates in.

“I engage in bartering for the sole reason na I should look for a replacement for a good that I find useless. Kaya for me, yung bartering na ginagawa ko, which is considered small-scale, doesn’t violate any tax law,” Cacdac said.

The sophomore student also noted that imposing tax in barter trades indicates double taxation.

“Based on my own understanding, putting a tax on barter transactions would indicate a double taxation. Kasi when the goods are bought, the seller would already charge a VAT tax to the buyer. After that, if ma-push through talaga ang tax on the barter trades, may another tax nanaman ma-impose sa sales ng buyer nung good/s,” Cacdac said.

“If may tax na talaga, it will cut-off the subsistence of numerous people. Kasi sa makita ko sa FaceBook page namin, usually food talaga such as, bigas, canned goods, sabon, toothpaste, and such ang gina-barter. Kaya if i-cutoff yan ng government by imposing taxes, I really believe that na mayroong social unrest, societal or governmental issues na mangyayari.”

Several netizens also expressed their opposition to tax barter trades, following Lopez’s declaration of barter as illegal.