Puerto Rico tries retail lottery to boost taxes
SAN JUAN, Puerto Rico – Don't throw out that lunch receipt: It could be worth $1,000.
That's the idea behind a campaign to force Puerto Rico's many tiny markets, food stalls and other mom-and-pop businesses to collect sales tax.
Puerto Rico's Treasury Department is transforming receipts into lottery tickets, printing contest numbers on each receipt and holding weekly drawings for cash prizes ranging from $100 to $1,000. It also plans to have a monthly drawing for a car.
A pilot program started in December in the southern city of Ponce and will be expanded island-wide in July.
The government wants prize-hungry consumers to demand receipts, discouraging businesses from dodging the 7 percent sales tax by making unrecorded cash sales.
Theoretically, the idea should be a winner on an island where lotteries are popular, but initial results aren't very encouraging: Eight winning tickets have been drawn so far and not a single consumer has come forward to claim a prize. Winners have up to 30 days to collect, and some receipts have already expired.
"It's a challenge," concedes Jose Carlos Colon de Jesus, a special assistant in the Treasury Department. "We have to change the mentality of the Puerto Rican so they demand their receipt."
The government plans a media blitz to promote the program, adding to heavy coverage by local newspapers, TV and radio. So far, though, it's been to little avail in Ponce, Puerto Rico's second largest city with nearly 200,000 people.
Wanda Colon, manager of a Church's Chicken restaurant in the city, said she's had customers ask where they can check to see if they have a winning number, but said many people don't seem aware of the program. She has had to remind them to take their receipt and why.
"They open their eyes really wide," Colon said. "Those who don't know say, 'How is that possible?'"
Four of Church's customers in Ponce have won $1,000. But none has collected.
The government says it is spending about $16 million on the effort, including equipment to print receipts with lottery numbers. But it is seeking a big payoff: The Treasury Department hopes to collect $400 million in additional sales tax revenue in two years as a result of the program.
Puerto Rican officials say they were inspired by Argentina, where a similar program several years ago led to improved tax collection.
That country aimed to crack down on tax evaders and black-market sales, and officials ran the program for about two years, said Oscar Murcia, an adviser to the president of the National Lottery agency.
It ended successfully after people became accustomed to demanding receipts, leading to increased revenues as tax evasion dropped, he said by phone from Buenos Aires.
Puerto Rico, a U.S. territory, has a formal economy that looks much like the mainland, with many of the same chain restaurants and stores. But it also has a large and varied underground economy — one where people deal in cash, keep few records and don't pay all the taxes the government thinks it should collect.
Roadside food stands are ubiquitous, offering savory empanadas and fritters, as are the small groceries known locally as colmados, their cramped shelves spilling over with bread, canned goods, beer and crackers.
Puerto Rico took in $1 billion in sales tax last year, but authorities estimate the government is only collecting about 52 percent of what it's owed under the law. It hopes the lottery will drive that number to 72 percent within three years. Any revenue is a priority for an island government that has laid off thousands of workers in recent years.
Some think the goal is optimistic. Sergio Marxuach, public policy director with the Center for the New Economy think tank in San Juan, predicted the take will fall short of the $400 million the government seeks. "I am a little bit skeptical of using technological silver bullets to help solve compliance problems," he added.
Other problems with the pilot program have been reported.
Officials acknowledged that people are not necessarily demanding receipts for more goods. Instead, they are divvying up their purchases to obtain more receipts.
They also said that some might view the program as a form of gambling that goes against their religious beliefs. If that's the case, they can donate winnings to charity, said Luis Rivera, secretary of the Consumer Affairs Department.
The program rolls out island-wide on July 1, and businesses that refuse to use the state-issued receipt machines will be fined $20,000. Those caught withholding receipts from customers will receive a $100 fine.
Officials hold a drawing each Tuesday for $1,000 prizes and plan to add four $500 prizes and 10 of $100, though the system is still be adjusted and the awards could be changed in coming months. A Saturday drawing will be added by late February.
Once a month, the government also will randomly select a receipt and give away a car.
Puerto Rico's Treasury Department: