The fiscal lotteries reinvented

There is, undoubtedly, an addiction for the lotteries and similar games among the population of several member countries. To remind a couple of examples, we just need to walk some blocks on the streets of downtown Caracas, where  the gambling sites used to abound, or to look at the outskirts of the Lottery Building in Panama city where the sales boots look much like those of a market but, instead of fruits and vegetables, they sell a single product: National Lottery tickets. The Christmas Contest in Spain is celebrating this December 198 uninterrupted years since this tradition began in Cadiz. Any Brazilian friend with some grey hairs already on the head will be able to tell you more than one story, almost mythical, about “jogo do bicho“, (clandestine lottery). Indeed the title of this post comes from an ad of the eighties from the Charity Board of Guayaquil in which a bus driver, with the  winning ticket in hand, is raised on  shoulders by passengers and passers-by shouting: “He won it, he won it” and that can still be seen today  thanks to YouTube.

This popular interest for the lotteries was surely a determining factor for the tax lottery programs that several tax administrations have developed over the years. The mechanics is relatively simple, the consumer, or sometimes his children[1], must make sure to obtain the invoice or equivalent in their purchases, with a determined number of them: five[2], ten or twelve[3]; in order to put them in an envelope and send them or deposit them in the Tax Administration to participate to the drawing. The main purpose has always been the same: to generate awareness among buyers so that requesting the invoice becomes a habit.

The prizes were variable, possibly in cash or including vehicles and household appliances. In Paraguay, in 2005 began the campaign “I requested, grouped and won” in which the invoices were collected in the schools. The institutions that gathered more invoices gained prizes. The money had to be invested in improvements to the facilities.

From the control point of view, no doubt that the administrations found a difficult situation:  how to turn efficiently those millions of invoices into indicators of irregularities? In theory, it is possible to transcribe the documents and to feed a data base for crossing the information and to detect, for example, if the salesman used authorized invoices numbers, if two participants were sending two invoices of the same salesman and with the same number, or if the total of the amounts of the invoices received from a salesman in a period were greater than the amounts that he had declared in his VAT return. It was a titanic task and with many potential errors. Perhaps some administrations exclusively limited themselves to perform some sampling inspection verifying if a handful of the received invoices had been registered appropriately.

Some technological elements have been recently added. In the 2009 Argentinian program “VAT and Return”, the data from invoices could be entered on the AIFP Internet website. The taxpayer had to keep the invoices that would appear in case they were winning. This innovation would allow a greater participation of consumers since they would not have to lose the invoices in order to compete. This is a very important detail for situations that involve large sums or products which guarantees are conditioned to the invoice. An alternative solution is developed in Paraguay in which the data of the invoices can be sent via cellular phones SMS messages to the Fiscal Lottery developed by the SET. These advances without a doubt extend the control possibilities because the administrations count already with data on those invoices in a digitalized form.

But the true innovation in this matter is occurring in Brazil where the consumption tax is administered by the states. Like in other countries, taxpayers who sell at the retail level and have income superior to a certain amount must use fiscal machines. The sales of wholesalers are generally already supported today by electronic invoices that are individually authorized by the tax administration.

To participate in the drawing, the consumer will have to register only once on the State Administration website with his number of “Cadaster of individuals” – (CPF in Portuguese) and to provide his CPF number in each purchase. The selling taxpayer, at the end of the month must transmit the detail of all his sales with fiscal coupon to the tax administration. With these elements, the drawing is performed.

The programs are called: “Paulista Fiscal Note ” of the State of São Paulo, “Fiscal Note Alagoana” of the State of Alagoas, “Legal Note” of the Federal District, and “Live note” of the State of Maranhão and with a scheme somewhat different “Cupom  mania” from the State of Rio de Janeiro

In general, through the electronic invoices available or the reported fiscal coupons, the consumers accumulate electronic points, coupons or tickets with which they will be able to participate in the drawings that give prizes in money, household appliances or in some case free entrances to soccer games.

The program can give back up to 30% of the consumer tax. It is clear that many taxpayers are going to request their tax note or coupon. In general the consumers can consult through the Internet their situation regarding credits and their points, the individual invoices and coupons, as well as the results of the drawings. Many taxpayers benefit with the credits. In the two first months, in the state of Maranhão, which is certainly not the most populated of Brazil, more than 70 000 participating consumers registered. A single supermarkets chain from this state reported, for the first month, more than 200 000 individual transactions. Some results demonstrated that in some economic sectors, like restaurants, bars and entertainment sites, the increase in the transactions reported by the taxpayers was remarkable.

From the point of view of the control, far from being a problem with warehouses full of useless papers, there is an enormous opportunity to increase the controls on the salesmen and, even, to detect total expenses no compatible with the income reported in the tax return of natural persons.

The dream of turning the consumers into true “tax inspectors” seems to be a little closer. I believe that it is very good to share these experiences and to study them. Specially for those administrations that have or had lotteries and  have developed or are developing electronic invoicing systems, even for detail sales; and those that work with fiscal machines, mainly those that can transmit through the cellular network their operations.

Greetings and, this being my last post of the year, my best wishes of good luck for 2012.

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