'Do You Want a Receipt?' Combating VAT and Sales Tax Evasion with Lottery Tickets

Marco Fabbri, and Sigrid Hemels, “ ‘Do You Want a Receipt?’ Combating VAT and RST Evasion with Lottery Tickets” Intertax 8/9 2013, p. 430-443

21 Pages Posted: 12 Mar 2013 Last revised: 23 May 2014

See all articles by Marco Fabbri

Marco Fabbri

University Pompeu Fabra, Department of Business and Economics

Sigrid Hemels

Erasmus University Rotterdam (EUR) - Erasmus School of Law; Lund University School of Economics and Management

Date Written: March 4, 2013

Abstract

Governments both in developed and developing countries are facing the problem of value added tax (VAT) and sales tax evasion. This explains a growing interest in policies alternative to the traditional methods of deterrence. This paper describes the achievements resulting from a zero cost policy against VAT and sales tax evasion based on rewards. Customers are encouraged to request an invoice by changing the invoice into a lottery ticket, thereby making VAT and sales tax fraud and evasion more difficult for suppliers. Such a policy has, for example, been introduced in some Asian countries. After having characterized VAT and sales tax evasion as a special kind of public good situation, a theoretical explanation based on behavioral Economics models of the success empirically registered by this policy will be discussed. Given this theoretical framework, we then introduce an empirical test in order to verify the ex-ante applicability of the policy described in different socio-economic contexts. Finally we discuss the possible countervailing effects as well as the positive long-term side-effects of the introduction of the policy.

Keywords: Tax Evasion, Public Goods, Lottery, Behavioral Economics

JEL Classification: H26, K34

Suggested Citation

Fabbri, Marco and Hemels, Sigrid, 'Do You Want a Receipt?' Combating VAT and Sales Tax Evasion with Lottery Tickets (March 4, 2013). Marco Fabbri, and Sigrid Hemels, “ ‘Do You Want a Receipt?’ Combating VAT and RST Evasion with Lottery Tickets” Intertax 8/9 2013, p. 430-443, Available at SSRN: https://ssrn.com/abstract=2232249 or http://dx.doi.org/10.2139/ssrn.2232249

Marco Fabbri (Contact Author)

University Pompeu Fabra, Department of Business and Economics ( email )

Barcelona
Spain

Sigrid Hemels

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.esl.eur.nl/profile/profiel_metis/1112068

Lund University School of Economics and Management ( email )

Lund

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