The Taiwanese war against tax evasion

by on March 28, 2009 at 1:17 pm in Law | Permalink

This passage reminded me of the Greg Mankiw student who wanted to boost spending through destruct-lotteries on dollar bills.  But this is a way to encourage tax reporting:

It seems tax evasion was a problem for the government in a country
where credit cards are not widely accepted and small business transacts
most business.  The government hit upon the idea of a sales lottery
rather than a sales tax.  Every sales receipt has a lottery number
printed on its back.  Once a month, the government publishes several
newspaper pages of winning numbers.  You can win anywhere between $5
and about $200 if you have a lucky sales receipt.

The government’s theory was everybody would demand a sales receipt
if they had a chance of winning a lottery.  You play anytime you make a
purchase; no matter how small a purchase.  The result is, as the island
has become more prosperous, most people don’t want to bother with
combing through thousands of lucky numbers in a newspaper once a month
to maybe win $5.  Charities stepped in.  Along many streets you see
clear plastic canisters promoting various charitable causes soliciting
your sales receipts.  Retired volunteers go over the numbers on
receipts collected.  It gives non profits a source of funding and gives
old people a steady way to contribute without hard physical labor.  The
Yngge Ceramics Museum I visited last Saturday collected sales receipts
instead of charging admission.  If you were without a sales receipt
(unlikely in this country) you could run across the street to 7-11 and
buy a piece of candy for pennies and come back with a sales receipt.

Here is the full story and thanks to Joel Cretan for the pointer.  Read the whole post, it makes many other interesting points about Taiwan.

Andrew March 28, 2009 at 1:33 pm

Haha, way late to the game. We already have a market for paper that pays off sporadically. Isn’t it called MBS?

Pablo March 28, 2009 at 2:12 pm

Argentina tried this back in the 90′s. It didn’t work very well. After a while the effect died down.

David March 28, 2009 at 2:42 pm

“This passage reminded me of the Greg Mankiw student who wanted to boost spending through destruct-lotteries on dollar bills.”

Could someone tell me what this is in reference to?

Sean March 28, 2009 at 2:57 pm

This is the case on the Chinese mainland as well. I’m not sure which began the habit. In China, it’s a scratch-off ticket. The restaurants will often directly pay most of the winners under 100RMB.

There’s also a demand for receipts as some employees are allowed a tax-free reimbursement for expenses they can show receipts for. Most of the expats I know are always in search of extra receipts to fill out their monthly quota.

If you don’t want a receipt, you can usually negotiate the price down quite a lot.

Luis Alves March 28, 2009 at 3:59 pm

The State of Sao Paulo in Brazil has a similar program but instead of giving you lottery tickets it gives you tax rebates.

anonymous March 28, 2009 at 10:24 pm

I’m not sure what the conceptual link is between Mankiw’s student’s idea and the Taiwanese receipt system. The latter exists here and now, while the former is basically inconceivable except in some hypothetical nightmarish economic future. Negative interest rates and dollar-bill destruction couldn’t be implemented except in an environment of strict currency controls and FDR-style bans on private ownership of gold, otherwise if people are forced to use ‘em or lose ‘em they’ll spend their dollars by buying euros and Krugerrands.

David Jinkins March 29, 2009 at 10:38 am

I live in Taiwan, and I just won $8 when I went through my receipts yesterday.

Seektruthfromfacts March 31, 2009 at 2:05 am

In mainland China I’ve been offered been offered small gifts *not* to take the scratchcard/tax receipt. I’ve also had restaurants attempting to give already-scratched receipts, receipts for lower amounts, etc.

Tax Evasion April 14, 2009 at 11:42 am

Giving you all receipts with lower amounts of money on them, shop owners will pay less taxes. Well, that definitely is tax evasion.

soft play November 10, 2009 at 11:37 am

Very interesting post. Thanks a lot. soft play

Foamy January 13, 2011 at 1:04 pm

This is a crazy idea… but it seems that it works just fine… I have to issue my congratulations for the mastermind behind this action. Good job sir!!!

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