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 [1] 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 [2].
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?
Even fierce critics of Armenia’s current government such as Nazarian are encouraged [3].
[…] 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 [4] 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 [5] 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։
Of course, as The Armenian Observer comments [6], 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].