The best way to collect taxes? Start a lottery

I've written a few times about the rising size of the black economy in the UK.We aren't the only place struggling with it. But, while we deal with the problem with moralistic soul searching combined with a confused mix of amnesties and threats, some other countries are taking a rather more pragmatic approach.

In Slovakia, the government has come up with a new lottery concept. You collect your receipts from all your transactions and register them on a government website. Those registered are then entered into a monthly lottery for prizes including €10,000 and a new car.

This, says the New York Times, encourages people to demand receipts and then creates a paper trail for transactions and forces "restaurants and shops to pay the sales taxes they owe."

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

It works. So far 450,000 people have taken part, some 60 million receipts have been registered, and 7,000 complaints about merchants not issuing receipts have been made (up from 300 in the six months before the lottery was introduced).

And tax revenues? It is impossible to tell how much of it is down to the lottery, but sale tax revenues rose by €512m in 2013.

It's hard to tell if it would it work in the UK. But given that the lottery in Slovakia cost a mere €276,000 to start up I can't see how we could lose by setting one up here and allowing anyone who can produce a proper traceable receipt from a builder, a plumber or perhaps a rural riding school to enter.