DTI says online barter trade illegal, must be taxed

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Trade Secretary Ramon Lopez (FILE PHOTO)

Metro Manila (CNN Philippines, July 14) –– Authorities will be cracking down on modern-day barter trade, saying it is illegal as transactions are not subject to taxes.

Trade Secretary Ramon Lopez said it was "very unusual" to hear urban communities resorting to the decades-old form of commerce to acquire goods.

The scheme, he said, is only allowed in "limited" places in Mindanao, namely Sulu and Tawi-Tawi, referring to Executive Order 64 signed by President Rodrigo Duterte in 2018.

Some homeowner groups have resorted to exchanging items by making deals online while under quarantine, seeing it as a platform to get what they need and let go of what they don't need without money involved. An agreement from both sides imply that the items being swapped are of equal value.

RELATED: Online barter trade grows in Iloilo amid COVID-19 crisis

"Sa ibang lugar, hindi po allowed 'yung barter trade. Kailangan regular transactions tayo diyan at dapat may tax na binabayaran [In all other areas, barter trade is not allowed. People must resort to regular transactions and pay the corresponding taxes]," Lopez said during the government's Laging Handa briefing on Tuesday, adding it was his first time to hear about this scheme.

It is unclear how such deals will be taxed. Existing rules of the Bureau of Internal Revenue state that value-added taxes may be imposed on consumption via the "sale, barter, exchange or lease" of goods and services.

"Ipapahanap natin 'yun dahil ilegal po 'yung activity [We will track that down because the activity is illegal]," the Cabinet official added, saying a composite team made up of the Department of Trade and Industry and the Philippine National Police may be deployed.

The same team also acts on complaints against online merchants.

Netizens reacted negatively to Lopez' statement, saying it was ridiculous to tax a simple exchange of goods.

"Nauso naman 'yan during lockdown dahil din sa pangangailangan, makakuha ka ng goods without spending money," user @tiptoeonclouds said.

"Isn't this already double taxation since the items were already taxed when they were originally bought?," Twitter user @busyfrancisco said.