Arthur Laffering it up(?) as the world admits that people will avoid taxes unless they have an incentive to pay them;
Following Greece and Slovakia, Portugal is the latest EU country to come up with a scheme to encourage its citizens to pay their taxes. Putting the carrot before the stick, so to speak, the government in Lisbon says that from April, individuals who pay VAT to small businesses such as hairdressers, plumbers, as well as bars and restaurants, and keep the invoice, stand a chance of winning a luxury car. The tax authorities there are predicting a 50-percent increase in tax revenue as a result.Undoubtedly that's wildly optimistic, but even Communist China has had to bow to economic reality;
In China, which has a lot of experience of operating such systems, the tax lottery has proved highly popular. Estimates suggest that the hidden economy makes up 13 percent of GDP. In 1998, the Communist Party, aware that it was losing millions of yuan a year in tax revenue, set up the Golden Tax Project, which included a receipt lottery, or fapiao. Anybody purchasing goods or services would ask for a special receipt with a hidden number that could be scratched away, leaving the seller with no choice but to declare the income from the sale.
The scheme was launched in Haikou, the capital of Hainan province. Some 80 cities soon followed suit, and it is now applied in just about every corner of the country. Prizes range from 60 cents of a euro to 6,000 euros, and the program has produced a 10.4-percent increase in tax revenue, according to a 2009 survey carried out by economist Junmin Wan of Japan’s Fukuoka University.10% being a long way from Portugal's prediction. But, it's nice to know that people all over the world don't get their money's worth from their governments;
Another area of the Spanish economy where fraud is rampant is home cleaning. José Félix Sanz [ a professor of applied economics at Madrid’s Complutense University] says there are few incentives to encourage employees and employers alike to declare earnings: most home cleaners do not earn enough to bring them up to the tax threshold.
In short, Sanz says, there are no easy solutions to tax fraud among small companies and the self-employed. “It is a very complicated issue. When people believe that the system is fair and is applied to everybody, then they tend to cheat less. Broadly speaking, people are prepared to pay their taxes if they see that the state spends their money wisely, and that the tax system is fair,” says Sanz.But where politicians spend almost half a nation's GDP, that's almost certain not to be fair.