In Ukraine, barter statistics for manufacturing began to be systematically collected in April 1997. Barter trade is recorded with shipment of an enterprise’s output. According to these statistics barter remained at about 40 percent level of total industrial shipments throughout 1997 and 1998; it declined to about 30 percent in 1999, and to about 17 percent in 2000 (Figure 1).
Figure 1
Structure of sale transactions in manufacturing, percent, 1997-2000
Sources: Statistics Yearbooks (1997, 1998, 1999, and 2000) and Monitoring (February 2001)
The share of barter varies significantly across different manufacturing industries. At the end of 2000 the largest barter volumes (as a proportion of total sales among manufacturing industries) are observed in Construction Materials, Machinery, and Fuels, while the smallest are in Metals and Food (Figure 2).
0 20 40 60 80 100
1997 1998 1999 2000
Barter Cash Other
Barter has also been used in the fiscal sector. In 1997, barter and barter-like operations made up 25 percent of both revenues and expenditures of the consolidated budget. This figure has been declining during the subsequent years to approach zero percent in 2000 (UAH 300 million, or less than one percent of the consolidated budget). There is some evidence, however, suggesting that the actual volume of non-monetary payments in the budget sphere is much higher than the official figures indicate.5 By some estimates, non-monetary payments in budget sector were about UAH 8 billion (rather than the official UAH 0.3 billion).
Figure 2
Barter in manufacturing industries, percent of total annual sales, 2000
Source: Monitoring (February 2001)
Agriculture has its own barter arrangements. The inputs delivered by the state to farms or purchased with government supported bank loans are paid back, partially or entirely, with agricultural products.
Most of them are deposited in the State Material Reserve. A large part of these input supplies and bank loans are never paid back, in any form. Therefore the agricultural debt has been growing. Barter as share of total sales in agriculture has been around 23-27 percent over the period 1997-1999 and dropped to around 19 percent in 2000. The highest share of barter is observed in vegetable-oil crops and grain – barter accounts for more than half of their total volume (Van Atta, Neubert, and Plakhotnik, 1998).
5 See “Cyclical Dynamics of the Demonetized Sector” in this volume.
0 10 20 30 40 50
Ferrous Metals Non-ferrous Metals Food Power Light Industry Chemicals Wood Fuels Machinery Construction Materials
Figure 3
Barter and quasi-barter operations in various sectors of the economy, percent of the total amount, 1997-2000
Source: Statistics Yearbooks (1997, 1998, 1999, and 2000)
Budget revenues
0 5 10 15 20 25 30
1997 1998 1999 2000
Budget expenditure
0 5 10 15 20 25 30
1997 1998 1999 2000
Industrial output
0 10 20 30 40 50
1997 1998 1999 2000
Agriculture
0 10 20 30 40 50
1997 1998 1999 2000
Exports
0 5 10 15
1997 1998 1999 2000
Imports
0 5 10 15
1997 1998 1999 2000
Wages and salaries
0 5 10 15
1997 1998 1999 2000
The share of barter in foreign trade, in both exports and imports, fell from 10 percent in 1997 to 1.5 percent (exports) and 1.4 percent (imports) by the end of 2000. Geographically, the share of barter is generally larger in trade with the FSU countries (4 percent, in the first quarter of 2000).
Finally, in-kind payments of wages, pensions, and social benefits are still another category of barter. In 1997, wages in kind constituted 5-6 percent of all wages due (paid and unpaid). The proportion more than doubled in 1998 and remained stable throughout 1999.
During the first half of 2000 the share fell to around 8 percent.6 Figure 4
Shares of mutual settlements in total incomes, by each category of annual consolidated budget, percent, 1999
Notes: EPT – enterprise profit tax VAT – value added tax PIT – personal income tax
Sources: State Tax Administration and Fiscal Analysis Office calculations (www.fao.kiev.ua and Harvard/CASE database)
In next few paragraphs we consider in greater detail non-monetary payments in public finance. Statistics covering the budget and diverse extra-budgetary operations provide data on so-called mutual settlements and the operations with promissory notes. In 1999 the share of non-monetary revenues in the consolidated budget was around 30 percent.7 Data from the State Tax Administration provide information on mutual settlements by categories of fiscal revenue (Figure 4). The largest share of mutual settlements is found in the
6 Source: Harvard/CASE database, Trends, and authors’ estimates.
7 Source: HIIDarvard/CASE database and authors’ estimates.
0 20 40 60 80 100
PIT Local taxes Excise VAT Land tax EPT Gas transit fee Rental payments
revenues of rental payments,8 reaching more than 80 percent, and the lowest (around 6 percent) is in the category of personal income tax revenues.9 The largest portion of total mutual settlements belongs to enterprise profit tax and value added tax – 47 percent and 25 percent, respectively (Figure 5).
Figure 5
Shares of each category of annual consolidated budget in total mutual settlements, percent, 1999
Sources: State Tax Administration and Fiscal Analysis Office calculations (www. fao.kiev.ua and Harvard/CASE database)
Another category of mutual settlements are those with extra-budgetary funds. In 1999, in accordance with Articles 43 and 45 of the 1999 State Budget Law, the off-budget mutual settlements related to energy supply came to UAH 4.6 billion. Mutual settlements with the State Material Reserve Committee accounted for UAH 1.6 billion, or 35 percent of total off-budget settlements (FAO, 2000).
Unfortunately, information about barter in the Ukrainian economy is collected and presented in such a way that it is difficult to reconstruct a complete picture. We are not aware of any published document that would provide this information in a synthetic and internally consistent form. No documentation on definitions, accounting methods, etc. is publicly available. Many questions remained unanswered. For example, it is not clear how in-kind repaying of arrears is reflected in the data on industrial sales. Is it
8 Rental payments are the payments made by enterprises for water, use of infrastructure, etc. They constitute a small fraction of enterprise obligatory payments.
9 The more detailed analysis of the mutual settlements based on the State Tax Administration data can be found on the website of the Fiscal Analysis Office:
http://www.fao.kiev.ua.
VAT 25%
Gas transit fee 3%
Land tax 8%
Excise
6% Local taxes 1%
PIT 5%
Rental payments
1%
EPT 47%
Other 4%
included in this data as “barter,” or as “cash,” or as “other”? It seems that in budget accounts the success in reducing mutual settlements was accompanied by an increase in tax arrears and in barter operations in debt payments. In other words, a swap of barter-for-debt in current accounts was “compensated” with debt-for-barter transactions in capital accounts. Similar tendencies have been observed in foreign trade.
Another problem is the definition of barter. There is a whole gamut of various semi-barter operations, involving various kinds of promissory notes, trade credit arrangements, give-and-take operations, debt-for-equity swaps, etc. They contribute to the fuzziness of the barter picture.
Barter is a nontransparent way of doing business. The lack of transparency in the official Ukrainian statistics on barter seems to be consistent with the murky nature of the barter itself.
2. Causes of barter in a post-Soviet economy: literature