Government Gamification on Tax Collection
Taiwan is my home country and as I became more knowledgeable in gamification, I continue to be more impressed with the level of gamification that is implemented in its society and culture (without these innovations ever really being called gamification). One of the things I have been most impressed with is how the Taiwanese government uses gamification (specifically Rolling Rewards) to ensure tax compliance.
Tax evasion is very common in most countries, where businesses prefer to take cash over credit cards so they could report less on their earnings. Most countries use the penalizing Core Drive 8: Loss & Avoidance by cracking down and punishing companies that evade taxes when they are caught, but besides a chronic lack of complete enforcement, it is also extremely costly to investigate all the businesses that are suspected of tax evasion.
Introducing Core Drive 7 into Taiwan’s gamified tax collection process
As early as 1951, the Taiwanese government has sought to resolve this problem by doing two things. First, it unified all receipt and invoicing systems into a central system, which means that all businesses that give out a receipt would have the unique receipt number and amount sent to the government for tax reporting.
But the second step is where we see true innovation. The Taiwanese government turned each receipt and invoice number into a lottery ticket for citizens to play. For every odd-numbered month, citizens can see if their receipt numbers match the winning prize, with the first place winning the equivalent of $62,000 (about 5 years worth of salary for an average new college graduate), second place $6,200, and scaling all the way down to $7 wins.
Because of this “Uniform Invoice Lottery” system, consumers are now demanding receipts and invoices from businesses, preventing the businesses from evading taxes by exchanging cash under the table. Not only that, consumers are likely to be willing to spend more since every time they make a purchase they can become a winner, boosting the economy in the process.
Even my grandmother has won many of the small $7 and $31 wins over the past two decades, just by doing what she already does – buy groceries, food, and gas.
As a result of the Uniform Invoice Lottery, the Finance Ministry collected 75% more in tax revenue in 1951 compared to 1950. Great ROI, especially for government efforts.
This has been so successful that the government added much higher prizes after that, topping at over $300,000 prize money, or the equivalent of over 25 years of salary.
In 2006, the Taiwanese government even started to transition these unified invoices into e-invoices, reducing the involved processing costs by $250 million and saving 80,000 trees every year.
We should see more of our governments implementing innovative solutions by motivating and engaging its constituency instead of just clamping down harder or making punishments for infractions more severe.