Governments use receipt lotteries to boost tax compliance

PEOPLE PAY taxes because governments say they must and society says they should. But what if tax compliance became fun? Governments around the world are encouraging consumers to ask for receipts by turning them into lottery tickets. Taiwan was an early experimenter, in 1951. The past decade has seen a flurry of such schemes: China, the Czech Republic, Lithuania, Portugal, Romania and Slovakia all now have them. Latvia will launch one later this year.

The aim is to make it harder for retail businesses to evade taxes. Worldwide, 20-35% of government revenue comes from value-added taxes (VAT) or similar levies on consumption. But as much as a third of what should be collected is thought to be forfeited because businesses under-report revenues. The problem is not business-to-business transactions; firms can usually reclaim any VAT they pay if they keep proper records. But when selling direct to consumers, it is tempting to accept cash without recording the sale. A tax-dodging retailer can undercut law-abiding rivals or pocket a higher margin.

The idea of a receipt-lottery scheme is to give customers an incentive to ask for receipts, thereby forcing sales to be recorded and taxed. Receipts might be printed with a code that can then be submitted into a central draw. Prizes range from decent sums of money to cars and holidays...

via The Economist: Finance and economics Business Feeds

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