Tax. It’s a lottery.

 

12 February 2014

Could a sales receipt be a winning ‘lottery’ ticket? Portugal is the latest of a number of countries intending to use tax refunds, lotteries or fines to encourage consumers to report payments they’ve made to retailers.
 
In what has been dubbed a ‘luxury receipt’ sweepstake, Portugal intends to combat tax fraud by offering cars as lottery prizes to customers who demand receipts for their purchases. The idea being that, by customers submitting sales receipts with their individual personal tax/social security number to the tax authorities, this would dissuade businesses from under-declaring VAT on cash sales. While one would suspect that ‘bargain hunter’ consumers might negotiate a hefty discount for forgoing a receipt, thereby colluding in the ‘black market’, studies in other countries have shown quite the reverse.
 
Sao Paulo in Brazil introduced a similar scheme in 2007 whereby customers provide their social security numbers to cashiers, and the businesses must submit their copies of the receipts to the tax authorities. The tax authorities then report which social security numbers have been entered, with customers receiving a 30% rebate of VAT paid to the business, and entered into a lottery with a potential $500,000 pay out.
 
According to a study undertaken by Harvard economist Joana Naritomi, thirteen million people entered into the receipts database in 2011, with one million complaints from customers that their receipts hadn’t been recorded. The result? Over four years, reported revenues increased by 22%, with an increase in VAT payments of over $2 billion. While ‘rewards’ to customers accounted for $1.6 billion of those increased revenues, it still resulted in a very creditable’ $400 million net increase to the regional government.
 
According to the Institute for Economic Affairs, the UK’s black market accounts for about 10% of the economy, or more than £150bn a year, yet HMRC’s tax ‘campaigns’ over the last four years have only netted £802 million. Maybe we should run a lottery?
 
 
Source: BDaily Business News