Image: © mohamed hassan via Pxhere

Here’s how to make tax collection fun

Countries where lots of businesses avoid paying tax are trying to solve the problem by turning receipts into lottery tickets.

Governments collect tax on all sorts of things: the wage you earn, the houses you own and the stuff you buy. The last one is known as Value Added Tax (or VAT) in the UK and it makes up somewhere between a fifth and a third of government budgets all over the world. When you buy something, you pay the VAT directly to the seller alongside the item’s price. It’s then the seller’s job to give the VAT money to the government.

But this doesn’t always happen. Sometimes, businesses will tell the government that they sold less stuff than they have, and keep the VAT for themselves. That’s much easier to do if there’s no record of the sales taking place - because it was paid for in cash and the seller didn’t make up a receipt. Worldwide, governments are estimated to lose out on about a third of VAT via this sort of tax evasion.

So a bunch of countries, from China to Portugal to the Czech Republic, have set up ‘receipt lotteries’ where you send the government your receipts in exchange for a chance to win some money or other prize. That encourages buyers to ask for receipts and stops sellers pretending transactions didn’t take place. If governments can get more money from existing taxes, they’re less likely to put tax rates up. That’s good for honest sellers and buyers, who would otherwise pay higher prices.

Read our explainer on: tax.

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