the Barter System
The kind of barter-trading mentioned wouldn't seem to cost too much in lost revenue, but in real terms it adds up. Much more has the potential to disappear via the online business conducted by franchised, member-only barter clubs. These work on a credit-based principle where the value of goods or services is calculated in dollars, and that amount is credited to the seller. In other words, Joe's Flooring wishes to offer for trade 10 rolls of carpet, normal market value $5,000, plus 10 hours of laying-time costed out at $800. As credits are usually calculated on a one-for-one basis with the US dollar, Joe's Flooring will then have 5,800 credits in the club bank. Now, the Island Dream Group needs a carpet re-fit at one of its resorts and they already have 7,000 credits of holiday-deals for sale. Keeping it simple, they make a trade for all of the carpet and labour, leaving them with 1,200 credits, while Joe's Flooring has none. From the tax department's point of view it is irrelevant that no money has changed hands. $5,800 has effectively been traded by both parties and will be regarded just as if Joe's Flooring bought a holiday-package with company money and the hotel group paid for a carpet job, all in cash. Both will be required to declare their respective sales and purchases in real-dollar value.
If this isn't sufficiently complex, add another tax hike and it's a wonder people bother to deal in anything but real money. In Australia we have GST the same as New Zealand, while the UK and South Africa charge VAT. USA has both GST and VAT. Canada is quite complicated, levying PST, GST and HST - it depends on the province or territory. These are taxes levied on most transactions of goods and services, and the barter system isn't immune. Consumers have to pay these taxes on the majority of purchases, whether made online or in regular stores; barter trading is subject to those very same rules. Individuals and corporations going out of their way to side-step the process are being grossly unfair; not only to the government, but in particular to the wider community which will suffer as a consequence.
Being honest, most of us would agree that taxes are a pain, but we all have to pay them. Sure, if we can get away with the odd cashie or swap, those are the perks of life that help balance the budget. As long as we aren't knowingly trying to be dishonest, no-one really cares; but perpetrators making a business out of deception and a considerable profit from it will eventually come under the taxman's spotlight. It is an accepted fact that ignorance of the law is no excuse; so, probably the best way to avoid falling foul of the system is to find out exactly what can and can't be done within the current laws of the country in which you live, then do the right thing. When everyone eventually follows the rules to the letter, surely we'll all be better off, tax-wise at least? Then again, pigs growing wings could be more likely!
For more detailed information try the following links:
Canada Revenue Agency
New Zealand
US Internal Revenue System
UK (Income tax)
UK HM Revenue & Customs: (VAT)
South Africa
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