Tax man to start offering lottery prizes? If it's good enough for the continent...

10 February 2014

car2Recently, HMRC announced that, to try and combat tax avoidance, they would start asking for contested tax up front while they decided whether the tax would end up being payable or not. Simple idea but possibly not-to-easy to enforce. We think HMRC are going about this all the wrong way. They need to take a leaf out of the books of an increasing number of tax authorities around the world and offer us, the people, high-end incentives to shop those not paying tax.

Portugal is the latest country to announce a ‘tax lottery’, where ordinary citizens can win a luxury car (unofficial estimated cost to the Portguese taxpayer, €90,000 each) simply by asking for a receipt for a cup of coffee or a haircut.

The black market in Portugal is, described as problematic (at almost a fifth of total output), with a great number of traders not registering with the tax authorities, and therefore never paying any tax. By incentivising customers to ask for an official receipt, complete with tax registration number, Portuguese revenue officials are confident the increase in receipts will more than outweigh the cost of the 60 cars a year being offered as prizes from April.

Tax experts say the measure is designed to appeal to Portugal’s penchant for gambling – the country is one of the biggest spenders per capita on EuroMillions, and to the social prestige attached to expensive cars. The fast lane on Portuguese motorways is sometimes nicknamed the “Mercedes lane”.

However, “If someone needs a plumber or an electrician, I suspect they’ll still be attracted by the discount resulting from not being charged VAT,” said John Duggan, a Portugal-based tax adviser, talking to the FT. “They’d be able to buy a lot of ordinary lottery tickets with the money they save,” he added sagely, charging €200 for this advice*

The idea is new to Portugal, but is not new around the world. A similar lottery run in the state of São Paulo in Brazil provided Portuguese inspiration and comparable schemes are used in Argentina, Colombia, Puerto Rico and Taiwan. It isn’t even the first such scheme in Europe, with  Slovakia’s version offering cash and cars in a tax lottery being run sucessfully since last year.

So could we see National-Lottery-Style adverts from HMRC in future? It could be you driving a nice car for shopping your mechanic to the taxman. Better hope it doesn’t break down…

*not really. This is an accountant joke.

TOPICS:   Motoring

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