The EU VAT Treatment of Vouchers (FM nr. 157) 2019/7.2.1:7.2.1 Why do people and businesses barter?

The EU VAT Treatment of Vouchers (FM nr. 157) 2019/7.2.1

7.2.1 Why do people and businesses barter?

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The question as to why people barter can be relevant for this research. VAT is an indirect consumption tax. The aim of the tax is to tax expenditure on (private) consumption. Under the applicable VAT rules, this consumption is measured or valued by what is received by the supplier (the taxable person making a taxable supply) in return for his supply. In case of bartering, this is (the value of) the (received) payment in kind. This implies that specific reasons for bartering may affect the valuation of the transaction, as I will explain 7.2.3. I will first examine the possible reasons for bartering.

Reasons for bartering can broadly be categorised as follows:1

1.

bartering because of absence of money (a monetary system) or different valuations of money as such,

2.

bartering because of (temporary) insufficient cash/cash flow (e.g. temporary insufficient financial solvency), and

3.

bartering because of what I will call ‘economic benefit’.

Of course, bartering can also be a result of any combination of these categories.

A reason for accepting specific (e.g. at first sight unfavourable) terms in a barter transaction can be based on, amongst other things, an ‘emotional’ or ‘relational’ component to the transaction, as I will also explain Section 7.2.2.

I will now briefly examine the above reasons for bartering or entering into specific barter transactions and establish which ones are relevant for this research and why.

7.2.1.1 Bartering in absence of money or because of different valuations of money as such7.2.1.2 Bartering because of (temporary) insufficient cash/cash flow7.2.1.3 Bartering because of economic benefit

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