On Lisbon’s cobblestone lanes, the Portuguese economy is hobbling along as it always has — in cash.
In a tiny, 100-year-old bar, Nuno Gonçalves pours out short glasses of ginja — a Portuguese sweet cherry liqueur — for his customers, mostly old men in flat caps. A small shot glass full costs 50 cents — cash only. There is a cash register, but it doesn’t print receipts.
“It’s a local business. They just count the money they have, and the bottles they sell,” explains a customer named Felipe. “They will not give you a receipt — and you will not ask for a receipt. Because, come on! It’s 50 cents.”
Just outside the door, a shoe shiner and his customer look confused when asked whether a receipt will be issued for the service.
“No, no,” they both say, emphatically. “I don’t give receipts, because then I’d have to register my business and pay income tax,” says the shoe shiner, João. “You need a license and I don’t have one.”
His customer nods in approval, his foot dangling in the air. With a proper receipt, he’d have to pay sales tax — which is 23 percent in Portugal.
These citizens are just trying to get by, with wages falling and unemployment up, in Western Europe’s poorest country. But they are also committing tax fraud. Under Portuguese law, receipts are required for all transactions. Small cash transactions like these add up to as much as quarter of Portugal’s gross domestic product — from which the government needs tax revenue, if it has any hope of exiting its bailout program this June.
In 2011, Portugal was forced to ask Europe for a 78 billion euro ($108 billion) rescue package. Lisbon is hoping to cleanly exit its bailout program this June, following in the footsteps of Ireland, which finished its own rescue program late last year. Portugal wants to avoid the fate of Greece, which has had to request additional loans. Curbing tax fraud and collecting all tax revenue are key steps toward that goal.
So Portugal has come up with a plan — a “Lucky Receipts” lottery, following similar programs in Puerto Rico, Brazil and Slovakia. All receipts for sales transactions — everything from the purchase of a cup of coffee to a new car or home — are entered into a national lottery.
“All transactions — that’s the beauty of it,” says Paulo Núncio, Portugal’s secretary of state for taxes. “If the consumer requests that the invoice be issued with his or her tax number, then the invoice will be eligible for the tax lottery.”
In Portugal, a citizen’s tax ID number is similar to a Social Security number in the U.S. Weekly lottery drawings begin on April 17 and are slated to last for at least a year.
The prize? A new Audi A4.
“It’s going to be on television — prime time,” Núncio says. “On Thursday evenings, I hope this will be the most popular event on TV.”
The idea, Núncio says, is that ordinary Portuguese will become civilian “tax inspectors” — pressuring their neighborhood vendors to issue receipts for sales for the chance to win a new car. The government stands to win on both sides: Receipts provide a record of businesses’ overall sales — and thus, how much income tax they should be paying. The receipts also must show sales tax — thus preventing the consumer and vendor from making an off-the-books deal to omit the 23 percent VAT (value-added sales tax) due to the government.
Núncio says requests for receipts are already up 45 percent since the lottery was announced in January. He’s hoping for up to a billion dollars in sales tax revenue.
Every little bit helps, notes Pedro Pita Barros, a professor of economics at Universidade Nova de Lisboa.
“And this actually may trigger people to create a habit of asking for these invoices,” he says. “If we don’t care too much about the motive by which they ask them. Doing it for gambling is not a civil duty you have — it becomes a lottery ticket. I wonder why we should think of the tax system as providing rewards for people for doing what they should already be doing in the first place.”
This Thursday, Portuguese will tune in to hear who among them has done his civic duty — and has been rewarded with a new car.
“I don’t even have a driver’s license. I don’t really have time nor money to take the test,” says law student Miguel Horta, shrugging in conversation with fellow students on a crowded Lisbon street corner.
And what if he were to win a car? “I’d definitely sell it,” Horta says.
Otherwise, he says, he wouldn’t be able to afford to fill up the tank.