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Taiwan’s Economic Brilliance: Pay Your Taxes, Win the Lottery

5 Dec 2010

“Hi everyone! We are the poor’s dream to wealth! INVOICES!”

It has come to my attention that this year is the 60th anniversary (on the 12th of December to be exact) of a Taiwan staple: the 統一發票, or the Uniform-Invoice. Not many people outside of Taiwan would know about this brilliant technique to increase and maintain tax revenue, but if it works so successfully in such a small country, imagine it being implemented in a larger country such as China, India, or the United States!

For the local Taiwanese public and businesses, these invoices/receipts aren’t just a way of accounting, they have become an integral part of everyone’s socio-economic life. Many of us who grew up in Taiwan or lived in Taiwan should be familiar with these usually tiny pieces of paper — many of us, young or old, would collect them and check the newspapers for the government-run lottery numbers based on these receipts. It is also not uncommon to find charity boxes asking for receipts at banks, supermarkets, convenient stores, and fast food restaurants like McDonalds.

In addition with the abundance of 7-Eleven‘s and FamilyMart‘s, and the Taiwanese dependence on them, its no wonder that these little invoices could pile up very quickly. So how did these buggers come about?

The first KMT Financial Minister of Taiwan came up with this taxation idea 60 years ago — a uniformed, government-controlled accounting method to prevent businesses from tax evasion by not reporting exact amounts of profit. In a stroke of genius, the Ministry of Finance decided that to promote these invoices to the businesses, they needed to create a customer demand for the invoices themselves – the best way? Why, to give out money to the public, of course! Hence, the creation of a government-run lottery system based on the invoice’s serial numbers. Another benefit of this policy was that businesses now had to report their profits to the government since the basis of their accounting is government run.

In the first year this policy was implemented, the tax collection went up by at least 75% — meaning that the government almost doubled what it earned the previous year. With the advent of convenience stores, it only benefited the government since everyone gets to collects lots and lots of invoices for the lottery. It is not unheard of for someone to go through a couple hundred invoices looking for a matching number in newspaper.

You might think the lottery isn’t much incentive since the chances of winning is so slim, but when you are collecting at least 3 invoices a day, your odds of winning go up! Why? Because the lottery system is based on matching numbers of varying degrees. The smallest prize is matching the last 3 digits of the winning first prize lottery number — so the more invoice the more likely there are multiple invoices with matching last 3 digits. There also are enough prizes to win, that there’s actually a good amount of people winning every month. Besides, you aren’t actually buying lottery tickets. Enough invoices can be collected just from going to the convenient stores, like a good Taiwanese would.

So, you think you wanna play — you are already playing if you live in Taiwan!

Life in Taiwan is like winning the lottery every month.

In about two weeks, this writer will be back in his beloved Taiwan with his beloved convenient stores (especially 7-Elevens), beloved night markets, beloved street food, beloved MRT, and other beloved unique localities.

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