A view from Dave Trott: Free money
A view from Dave Trott

Free money

My wife is Chinese so, obviously, all my in-laws are Chinese.

I know the Chinese like to gamble, but an even stronger emotion is they hate waste.

They hate wasting time, wasting money, wasting food, anything.

That’s why the Taiwanese government was having trouble collecting taxes.

The Chinese work hard for their money, but they’re not fond of paying tax.

It seems wasteful.

Why would you let someone else take what you worked for?

Consequently, the Taiwanese authorities knew a lot of the country was avoiding paying tax.

All over Taiwan, the economy is largely based on small shops.

And the ordinary Chinese working people don’t like credit cards.

They like cash.

Consequently, most of the transactions in these shops were untraceable.

Goods and money changed hands, so there were no records.

If there are no records, there’s no tax to pay.

How could the authorities solve the problem?

The cost of investigating and prosecuting all the offenders would far outweigh any savings.

Which is where the Taiwanese authorities got creative.

Instead of forcing people to act the way they wanted, they used natural human instincts to nudge people.

What the government wanted was for shops to give a receipt with every purchase.

All receipts would then be electronically recorded on a centralised database.

So tax could be easily collected.

But how could they get the shops to give out receipts?

The answer was to shift the focus.

Away from enforcement, towards the customer.

To turn the customer into the person who insists on the receipt.

How they did this was by creating the Uniform Invoice lottery.

Every receipt has a series of numbers printed on it.

All the numbers are then entered into a lottery.

The winning numbers are read out on TV.

People with all eight numbers win 200,000 Taiwan dollars.

Those with seven numbers win $40,000, six numbers win $10,000, five numbers win $4,000, four numbers win $1,000 and three numbers win $200.

And at every draw, there’s a special prize of $2m.

(This in a country where the average salary for a graduate is $15,000.)

Immediately after the lottery started, the government saw a 75% increase in tax revenues.

And it was all voluntary.

The tax authorities didn’t have to enforce anything.

Because no customer would leave a store without insisting on the receipt that could win them thousands of dollars.

Over the years, everyone has stories about local people who’ve won at least the smaller amounts: hundreds of dollars.

And the shops advertise all the winners they’ve had in their windows.

It’s good for business.

They want to appear to be a "lucky" shop, a place where you have a better chance of winning.

That means more customers.

And all of it is done without threatening or punishing shopkeepers.

It’s all done by simply turning customers into the ones who enforce the system.

Just by giving customers a tiny fraction of the extra cash collected.

And spotting that the Chinese love gambling and hate wasting the chance of free money.

Dave Trott is the author of Creative Mischief, Predatory Thinking and One Plus One Equals Three.