Armenia hopes lottery will stamp out tax evasion

In a lottery program that will be broadcast live on Public TV at 20:00 Prime Time today – Armenia is offering thousands of dollars in lottery prizes to consumers who take receipts for their purchases to try to tackle rampant tax evasion.

Fiscal LotteryThe initiative began on January 1, after authorities said the threat of prosecution had failed to encourage shopowners and market sellers to install cash registers and provide receipts.

Authorities estimate the grey economy accounts for 30-40 percent of economic activity in Armenia, a landlocked country of 3.2 million people, in transition since the collapse of the Soviet Union.

Street sellers are everywhere and markets rarely have cash registers.

Under the new scheme, if customers buy from a trader with a cash register, they stand to win between 5,000 drams (11 pounds) and 500,000 drams. One lucky winner, if the eight-digit number on their receipt matches that drawn in the monthly lottery, will win 5 million drams ($16,000).

The monthly prize fund amounts to a maximum of $380,000. The government hopes the lottery will bring in an extra $17 million per year in tax receipts.

While the resistence is high among small traders and often even big shops and restaurants to install the cash machines and accurately supply receipts, it seems that housewives mostly enjoy the whole process of asking the receipts with the prospect of winning the big prize.

Pretty soon I’m sure, the lovely Armenian tradition to corrupt and spoil everything will surface, and we’ll find out, that the people involved in handing out lotteries have organized everything in a nice scheme to ensure money goes to their relatives, etc.

However, so far I quite like the idea and will definately tune in to Public TV at 8 this evening.

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11 thoughts on “Armenia hopes lottery will stamp out tax evasion

  1. Even if the prize money will go to only certain individuals, people are still going to ask for receipts, which is exactly the aim of the whole thing. Plus, if a receipt holder doesn’t win anything, he/she will not have lost anything either, since he/she did not spend any money on buying a lottery ticket. In other words, it’s a win/win situation for everyone.

  2. Incentivising the behavior on the consumer side is a good way to achieve results. Ideas like ‘civic duty’, ‘thinking about the future’, etc. sound good on TV but in real life people need incentives or disincentives to modify their behavior. So, a lottery is a great way to incentivise the behavior of the consumer. Everybody loves free things with no strings attached.

    So, the consumers will control the handing out of the receipts from now on. But how will the retailers cope? Will they stop evading taxes?

    The answer is ‘maybe’. Since the consumer is incentivised to demand a receipt with a receipt number on it, s/he will receive it. But from what I see, the amount written on the receipt is irrelevant to the consumer, i.e. there is no incentive, or disincentive, to have the correct amount. The retailers will start handing out receipts that show a lower purchase price (hence lower revenues and lower taxable income on their books). They will commit fraud, and the consumers will commit fraud by taking part in the lottery with fraudulent receipts.

    The whole population will thus become fraudsters if there is no control over the amount written on the receipt.

  3. Actually, the amount on the receipt matters. You get bonuses for each 1,000 AMD on the winning receipt. So, there is an incentive to demand that the right amount be written on the receipt.

    Will there be fraud? Undoubtedly. Tax evasion has existed ever since taxes were created. However, I still say it is a good idea and it will work. Even if not 100% of the customers get 100% of the receipts, the number of receipts given out has already increased many fold and will continue to increase.

  4. Btw, I have personally collected about 110 receipts in January and none of them have the wrong amount on them, and I have never had to ask to make sure I get the right amount printed on them.

  5. Yeah, V, thanx for mentioning that. Indeed – there is an incentive to make sure you have the right amount.

    Anyway – the lottery is over now. Has anyone won anytbing? Would be great to know!

  6. Good to know. This will hopefully start generating some sense of civic belonging among the people. I hope the government doesn’t screw up and start saving money on the lottery.

  7. According to some news reports I heard on TV, some supermarkets reported a 7-fold increase in January sales, compared to January 2008. This is obviously due to the winning receipts, since they were under-reporting last year, whereas now they are forced to give out receipts and report real numbers.

  8. Well – my wife and Mom were rather disappointed I must say :) they had checked 20 or so receipts and got really close to winning 5,000 AMD, missing one digit.

  9. Tell them not to get disappointed. At least, they did not spend any money buying lottery tickets.

  10. My girlfriend’s sister won 5000 AMD. They were more excited about the fact that the lottery was actually for real than for the money itself.

  11. Pingback: Global Voices Online » Armenia: Tax Lottery

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