Finland Times

A decision by Finnish tax authorities to bring time banking activities into the tax net is eroding the popularity of the alternative moneyless exchange system.

Time banking or community exchange is relatively new to Finland. The moneyless system of exchanging goods and services exclusively on the basis of need has long been practiced in many countries from Japan to parts of South America and is widely seen as a community-building activity.

But that hasn't stopped the Finnish Tax Administration Vero from determining that the exchange system should be subject to taxation.

"Work and services exchanged in the time banking system differ from job trading mainly in that time bank members don't trade work directly among themselves. However because both involve work as compensation, that work is taxable income," Vero said in its ruling last November.

The country's most active community exchange system City Time Bank (STAP) which operates in Helsinki responded immediately, noting that the ruling ignored the principles and goals of time banking.

"Time banking operations cannot be defined by price," the organization claimed, adding that its activities are based on helping to balance supply and demand while developing a culture of community and strengthening the local economy in a socially and ecologically equitable manner.

"Everyone has equal value and an equal opportunity to participate," STAP added.

STAP called for a two-year tax holiday for Finnish time banks to provide authorities and exchanges with sufficient time to evaluate time banking's impact on society and its role in promoting national welfare.

Now six months down the line in June, STAP says the move to bring time banking activities into the tax net has put a damper on public enthusiasm for the alternative form of exchanging goods and services.

In a letter to Helsinki city authorities, STAP said that time banking activity had declined as a result of the tax ruling.

"One reason is that our members are uncertain about the tax implications because of the ambiguity of the guidelines," the organization remarked.

While the tax authorities see time banking as a possible loophole allowing unregistered - and unregulated - business activity to flourish, proponents point to the practice as a social revolution helping individuals, and communities to break free from the tyranny of money, cash transactions and debt.

Exchanges may involve record keeping, time exchange, barter, swapping, gifting or sharing. Most turn on a system of "time credits" -- keeping a record of who has received what - and eliminate the need to first get money to acquire goods and services.

Community exchanges like STAP say they want a more meaningful national dialogue on time banking before authorities hasten to classify and tax their activities without really understanding them.

The small political think tank Left Forum has been the first organization to collect data on the practice of time banking in Finland. In a report issued in June, the NGO said there are about 3,000 active users in roughly 20 organized community exchange systems throughout the country.

The Left Forum report noted that the vast majority of exchanges involved everyday chores such as gardening, snow work, shopping assistance, child minding, pet care and moving services.

"In Finland time banking doesn't seem to compete with commercial or public services," said report author Teppo Eskelinen, adding that community exchanges appear to complement rather than compete with public services.

Eskelinen proposed the adoption of a taxation system based not on money, but on the time bank's own currency - time credits. The final solution would have to be shaped by tax authorities working hand in hand with community exchanges, he added.

Eskelinen noted however that in larger scheme of things, time banking plays a relatively insignificant economic role in Finland.

The next move in the quietly bubbling dialogue will be left to the tax administration as it seeks to follow through on its intention to tax a minority trading system it may not fully understand, and where members may simply opt out of declaring their contributions to avoid the tax trap.