several countries have done it and it seems to work

More than a decade ago in China they devised a method to avoid tax fraud. They wanted businesses to pay their taxes and they created sealed cash registers that the government delivered to businesses and each time a transaction was made it was recorded and taxes were paid.

The problem was how to get people to ask for his receipt, since there is no incentive for this. And the solution was very simple: each receipt was a “scratch card”, the customer scratched his receipt and could receive a succulent financial prize. The system began in 1998 in one city, in 2002 it was already operating in 80 cities and today in practically the entire country.

And why does no one dare with the lottery system?

The lottery system has done a lot to reduce tax evasion and therefore China’s revenue has increased dramatically. And the big question is why such a system has not been implemented outside of China. The most logical answer is that the problems that China had are not comparable in other countries.

China had a very cash-oriented economy, not like in Europe where there are plenty of electronic payments that leave their mark. It is also normal that where fraud is higher, any measure pays for itself, something that might not happen in Europe where putting a similar system could cost more than what is collected.

But the European crisis has taken us to unexpected places. Governments must get money from under the stones and some have thought that the Chinese example might well be replicated. Today we have two examples in Europe of tax lotteries.

Portugal and Slovakia launch their lotteries

The first has been Slovakia. There since 2013 there is a fortnightly raffle, but the system ended this year. To participate, you only had to have invoices greater than one euro and request a number in the draw (13 cents if it was done by SMS, 20 cents if it was in a lottery administration). The prizes ranged from 1,000 to 10,000 euros. It seems to me a mistake to charge for the draw since if the intention is for citizens to ask for the receipt it is a disincentive. The system should be paid for with the outcrop of black money. The effects were positive but in February 2021 it was decided to stop.

Portugal launched its system in 2014. In order to participate, you have to request an invoice by giving your NIF, and it will automatically be registered in a system. Citizens can see how many numbers they have for the draw (depends on the amounts). Every week cars and cash are raffled off (90,000 euros). The system has been useful but studies indicate that it is more effective to use tax breaks than just sweepstakes.

Two countries that have dared to replicate the Chinese system. Will someone else sign up? Italy at the moment seems to will launch soon but it is not something that has been universally spread.

Would it work here?

I personally have my doubts. If there were a similar system in Spain and it was implemented well (I think scratch cards are the easiest method for everyone, also leaving proof of the transaction) something could increase the collection, but where there is truly fraud, a lottery ticket cannot help .

I mean, of course, the typical “With VAT or without VAT?”. It is clear that if a business offers you to pay or not pay 21% of the amount in a service, a lottery ticket is very expensive. It could even be counterproductive, people might think that 21% of a 500 euro car repair is a lot of money for a raffle instead of thinking about the contribution to the maintenance of the state or that the work done will be able to be demonstrated in case of later problems.

And that’s where most of the fraud occurs. This measure would stop shops of low amounts from having box B, since it would not be very normal for a cafeteria to tell you that the coffee is one euro without VAT or 1.21 with VAT. But in other higher-value areas there would still be fraud.

Even so, any measure is good to try to combat tax fraud, and if the measure pays for itself in reducing fraud it is worth implementing.

More information | CSMonitor, Five days, Gurus Blog

In The Salmon Blog | Tax fraud, money laundering and capital evasion

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