How do you solve a 50% sales tax evasion problem the Puerto Rican way? Print free lottery tickets on the sales receipts of course!
After the IVU (Impuesto sobre Ventas y Uso) sales tax was passed in 2006, the Treasury Dept. estimated that only about 50% of sales were being reported (est. $800 million per year). It seemed that many Puerto Ricans would rather just deal in cash than have the government get all up in their britches. Naomi and I actually had a small shop owner tell us straight up that if we paid with cash he wouldn’t charge us sales tax. It was also suspected that many merchants were collecting the tax from customers, but not remitting it.
“Hmm, how can we turn all of our citizens into IRS agents,” the government asked. “Well everyone loves lotteries, right? A lottery it is then!” The solution was to require every merchant to install a special terminal or have their credit card machines reprogrammed. These terminals would report back to the Treasury Dept. and print a lottery number on every receipt, including cash receipts. The idea was to give customers an incentive to ask for a receipt, which would require the merchant to report the sale. If a merchant didn’t provide a receipt, the customer could report them. The IVU Lotto takes place every Tuesday and Saturday, each with a prize of $5,000, $1,000 and eight awards of $500. Once a month, the government also randomly selects a receipt and gives away a car.
I’ll be the first to admit that this sounds like a really creative solution! It hasn’t seemed to work out quite as well in practice, though. With several of the early months with no winners and the July 5th drawing resulting in all winners from JC Penny’s, there were serious doubts as to its success. The Lotto still sees fewer than 1/3 of winners claiming their prize. The low level of participation may be due to a number of things. Perhaps people haven’t had time to develop the habit of keeping their receipts and checking the weekly drawings, or they may have religious concerns and are refraining from participating in the giveaways. Local religious groups have been opposed to the IVU Loto concept, saying it represented forced gambling.
Either way, I’m now hanging onto my receipts! There’s even an iPhone app that you can enter all your lotto numbers into and it will let you know if you’ve won. Big bucks and no wammies! You can’t win if you don’t play!!!