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Armenia: Tax Lottery

Unsuccessful with punitive measures to prevent widespread tax evasion, the government of ex-Soviet Armenia has introduced a monthly national lottery based on an 8-digit number found on the back of sale receipts. From increasing sales to encouraging male customers to hit on female shop assistants, bloggers think the initiative to make businesses accurately report sales and pay taxes has the potential to prove a win-win situation for everyone.

Notes from Hairenik, a blog by an American-Armenian living in the country, recounts first becoming aware of the new initiative.

A few weeks ago while riding the metro to work I noticed a sign in the train car reading that consumers should be sure to take sales receipts so that they will win money. I didn't understand the logic in that naturally so I shrugged it off and went to the office.

Turns out that the government is now requiring and enforcing that all stores, no matter how small, install cash registers, or calculators at least as many vendors are using, to print receipts. The paper rolls that the receipts are printed on are government issued.

[…]

On the back of each check is an eight-digit number which ends with an Armenian letter. Apparently at some time in the near future these numbers will be called, like in a lottery, and if the number called matches the one on your receipt you can win money–up to $16,000 if you're lucky enough… I am not ashamed to admit that I am indeed saving all the receipts that I receive, in case I happen to win enough cash to put down towards the payment of an apartment. You never know.

[…]

[W]hat's the excuse of thousands of citizens who make money but refuse to pay [taxes]?

Having recently visited Armenia, Areyon [RU] is also unhappy with businesses who refuse to pay taxes.

Он не может понять, зачем ему ставить кассовый аппарат, деклалировать свои доходы и исправно платить с них налоги – то, что давным-давно принято во всем цивилизованном бизнесе…. А освещение на улицах города, а ремонт дорог, а стрижка газонов, а закупка вооружения для обороны семей этих самих лавочников – откуда именно правительству получать и тратить деньги на эти общегосударственные нужды?

[The Armenian businessman] cannot understand why he needs to get a cash register, declare income and pay taxes from it – something that has been accepted in civilized business for a long time. … And street lights, road repairs, street landscape, and purchase of arms for defense of families of these shopkeepers [who don’t want to pay tax] – where exactly is the government supposed to collect and spend money on these statewide needs?

Even fierce critics of Armenia’s current government such as Nazarian are encouraged.

[…] In Armenia there is no social contract of providing receipts. Tax evasion has been, and remains, a popular way of accumulating wealth for the business elite in the country. One way has been to under-report revenues. You basically have two sets of books: one is the real one used for decision making, and the other one is for the government where your revenues are the same, or less than, your expenses so you don't pay income tax…

The new approach is to incentivise the consumers by giving them money. Getting a percentage of the sales would not make much sense (who cares about a few cents per purchase?) so the government pools this percentage into a lottery with a few prizes depending on the amount on the receipt as big as $16,000. Obviously, there is a lot of interest among the consumers. By basing the prize on the amount of the purchase, they make sure that the consumers demand that the sales be recorded correctly. Through a televised lottery they make sure that the retailers do not keep two sets of receipts, i.e. give out a fake receipt.

The upside for the retailers is that they get a way to promote their brand for free. Another upside for the retailers will probably be that the amount of the average sale will increase since the prize depends on the amount.

The possibility to increase sales is particularly significant during the global economic meltdown. The Armenian Economist already reports that sales in 2008 were down in comparison to the previous year.

Compared to 2007, sales dipped by 5 percent in March [2008] following the disturbances in Yerevan on the first of the month. In early August, war broke out between Georgia and Russia which in effect cut off Armenia's links to most of its trading partners. Real estate transactions dropped by 22 percent in that month compared to sales in August of 2007. And it has been on the decline ever since, with sales lower than the comparable figures for 2007 by 35 percent in November. Obviously instability in Georgia does not bode well for Armenia. It is not clear whether the global financial crisis has hit Armenia as of yet…

While the lottery system might increase sales, there are other potential perks and incentives, it seems. The Tert blog says it also provides male customers a new way to hook up with pretty shop assistants.

Մեր փողոցի խանութներից մեկում մի սիրունիկ վաճառողուհի կա։ Որ ասես հանվի` կհանվի, բայց որ ասես` ՀԴՄ կտրոն տու, կարող է մի ապտակ ստանաս։ Մի 2 օր առաջ առանց պահանջելու կտրոնը խփեց, ասի` չեմ ուզում։

Երևի կյանքումս ոչ ոքի այդքան երջանկացրած չկամ։ Մի խոսքով` մեր ֆիքստուլ հայ տղերքը սիրունիկ աղջիկներին կապելու հրաշալի միջոց ունեն` ընդամենը հարկավոր է մտնել խանութ, ինչ-որ բան գնել ու հետո արհամարհաբար հրաժարվել շահող կտրոնը վերցնելուց։

There is a cutie clerk in on of the shops on our street. If you tell her to take off her clothes, she will. But if you tell her to give you the receipt, you may get slapped on your face. A few days ago she gave me my receipt without me asking her to do so – I said I didn’t want it. I hadn’t made anyone so happy my entire life! In short, our cool-wannabe Armenian men have a wonderful way to hit on cute girls: all you need to do is to enter a store, buy something, and then ignore the receipt.

Of course, as The Armenian Observer comments, the initiative is likely to be most successful with women.

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.

The first lottery draw took place live on Armenian Public TV H1 on February 6, 2009 with 76201843 as the winning number while oversight in the process is also provided online by http://www.e-tax.am.

7 comments

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  • Yandunts

    Great story Simon.

  • […] Armenia: Tax Lottery Global Voices Online – Cambridge, MA, USA by Simon Maghakyan Unsuccessful with punitive measures to prevent widespread tax evasion, the government of ex-Soviet Armenia has introduced a monthly … […]

  • […] (Hat tip: Global Voices Online) […]

  • […] Fast forward to the present and power is relatively reliable, water is usually running, mobile phones are everywhere and the mobile/internet monopoly that had once existed has toppled with people now surfing on WiMax. Most amusing was the government’s brilliant scheme to get rid of tax corruption. Now, on the back of every receipt, consumers can find a unique 8-digit number, which corresponds to a new lottery sponsored by the government of Armenia and the State Revenue Service. A winning receipt could win up to 5 million AMD (about $16,000). The government has heavily advertising the scheme with the motto, “You win. The state wins.” It’s not only encouraging people to ask for receipts, it’s apparently improving sex lives as Armenian men have a wonderful way to hit on cute girls: enter a store, buy something, and then ignor…. […]

  • Most amusing was the government’s brilliant scheme to get rid of tax corruption. Now, on the back of every receipt, consumers can find a unique 8-digit number, which corresponds to a new Lottery Tips sponsored by the government of Armenia and the State Revenue Service.

  • […] off “golden numbers” is quite a revenue generator. The golden plate auction, like the tax lottery, is a means of accommodating societal preferences while collecting taxes and fees that are […]

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