Lottery is forcing Slovakia’s shop owners to pay sales tax
The idea of Slovakia’s tax lottery is to enlist average citizens to collect receipts from their purchases and register them with the government, creating a paper trail for transactions and forcing restaurant and shop owners to pay the sales taxes they owe.
The New York Times
BRATISLAVA, Slovakia — When Jozef Lazarcik, 35, a factory worker, heard his number called on national television recently, he pumped his fists, hardly believing his luck.
He had registered only nine receipts with Slovakia’s new tax lottery, and yet he had just won a new car.
“It’s a heavenly feeling,” he said before leaving the studio, ready to encourage all of his friends to register their receipts, too — which is exactly what Slovakian officials were hoping for.
In the past 10 years, Slovakia’s revenue from value-added taxes, a type of sales tax, has declined. But hiring auditors and pursuing individual merchants and service providers in court is expensive and slow. So last fall, the government put a lottery in the mix.
The idea is to enlist average citizens to collect receipts from their purchases and register them with the government, creating a paper trail for transactions and forcing restaurant and shop owners to pay the sales taxes they owe.
As Slovakians register their receipts for the lottery, a computer will also tell them if a merchant has issued a receipt with a fake tax-identification number, so they can report suspected fraud.
For any purchase worth more than 1 euro, or about $1.38, Slovakians can enter their receipts in a monthly lottery to win 10,000 euros, a car or a chance to be a contestant on the Slovakian version of “The Price Is Right.”
Tax officials say the lottery is having a big impact, and other European countries that are also struggling with the collection of value-added taxes have considered it — including Portugal, which started its own tax lottery Thursday. In Slovakia, about 450,000 people have taken part, registering about 60 million receipts, officials said.
Complaints about merchants who will not give receipts have skyrocketed. In the six months before the lottery began, the government received about 300 such complaints, officials said. In the first few months after it started, that number rose to 7,000.
“It has been a huge success so far,” said Peter Kazimir, Slovakia’s finance minister.
Value-added taxes are an important source of income for European countries, but collecting them has grown more difficult during the economic crisis. A recent report for the European Commission found that uncollected value-added taxes in the European Union (EU) — a measure known as the value-added tax gap — amounted to about $267 billion in 2011.
For some countries — especially Greece, Ireland, Latvia, Portugal, Slovakia and Spain — the problem has been particularly acute. A decade ago, Slovakia was able to collect about 80 percent of taxes due, said Peter Golias, the director of Ineko, a nonprofit economic-research group in Bratislava, the capital. That figure is now about 60 percent, putting Slovakia in a league with Greece for the poorest record on the collection of value-added taxes.
Golias said some people had been inspired to play the lottery because they were tired of tax cheats.
“They really want to help,” he said.
For others, it is more about winning. Sylvia Skanderova’s father once won about $11,000 in a lottery. That has made him an eager participant in lotteries of all kinds, she said, but particularly this one, because it costs nothing to play. He spends three hours every Sunday registering receipts.
“The neighbors, they know my father does this, so they bring him receipts,” said Skanderova, 26. “Every Sunday his eyes are bloodshot. We have huge plastic bags in the basement with receipts.”
Zuzana Candikova, a manager at Planetka Restaurant in Bratislava, is hoping to win a cash prize that she would use to help buy an apartment. She collects receipts that her customers leave behind, but she has a friend who does the registering. If they win anything, they will split it, Candikova said.
The lottery is not Slovakia’s only push to increase its tax collection. In the past few years, under pressure from the EU to improve its finances and attack corruption, the government has also run a “name and shame” campaign against tax cheats, raised the salaries of tax inspectors and stopped political appointments in the tax office, among other measures.
Tax collection began to increase early in 2013 and rose more sharply after the lottery began. Officials say they collected about $512 million more in 2013 than in 2012. How much of that is a result of the lottery may never be clear.
But Kazimir said that it was surely a big factor, and that it had cost only about $276,000 to get the lottery going. He said the new influx of complaints had proved that it was not just small businesses that were cheating: Chain stores have also been caught giving fake receipts.
In Portugal, too, the value-added tax gap has grown since the start of the economic crisis. Having asked for a bailout of about $108 billion in 2011, it is under pressure from its creditors to do better.
Portuguese officials believe their tax lottery will be especially effective because gambling is popular among Portugal’s 10 million inhabitants, who are among the biggest participants, in terms of spending per capita, in the EuroMillions lottery shared by nine European countries. In the past decade, the Portuguese have spent an average of $1.2 billion a year on EuroMillions.
Paulo Núncio, the Portuguese secretary of state for tax affairs, said the government was counting on the new lottery to raise its tax revenue by about $830 million to $1.1 billion.
Even before the start of the Portuguese tax lottery, it was generating excitement. In the food court of the Amoreiras shopping mall in Lisbon recently, customers ordering hamburgers joked that their lunch order could result in a new car.
The lottery project has drawn criticism from some Portuguese opposition politicians who say it is a capitalist tool to turn citizens into tax inspectors.
Diogo Ortigão Ramos, a partner at a law firm in Lisbon, said the lottery also raised “questions of compatibility with EU law.” For the time being, though, the European Commission has not addressed this issue.
Portuguese merchants say they have already seen a change. João Raposo, a restaurant owner, said customers were increasingly asking for a full tax receipt, when “five years ago nobody would have bothered.”