Promoting Tax Compliance Through Prize Lotteries: Is It Feasible in Indonesia?

Can Paying Taxes Win You a Lottery Prize? It may sound unusual, but it's a reality for some countries like Taiwan. In fact, this approach has proven to be an effective way to improve tax compliance. By implementing a receipt lottery system, Taiwan succeeded in increasing its tax revenue by more than 50%.

Psychologically, humans are naturally drawn to the prospect of receiving substantial rewards with minimal risk or effort. This is precisely why lotteries are so popular. The Taiwanese government has capitalized on this psychological tendency through a tax receipt lottery system aimed at improving tax compliance.

As Indonesia strives to broaden its tax base and improve its tax ratio, the relevance of adopting a similar receipt lottery system deserves serious consideration.

If implemented properly, this concept could serve as an innovative tool to strengthen tax compliance in Indonesia. But how exactly does this receipt lottery system work?

Psychologically, humans are naturally drawn to the prospect of receiving substantial rewards with minimal risk or effort. This is precisely why lotteries are so popular. The Taiwanese government has capitalized on this psychological tendency through a tax receipt lottery system aimed at improving tax compliance.

As Indonesia strives to broaden its tax base and improve its tax ratio, the relevance of adopting a similar receipt lottery system deserves serious consideration.

If implemented properly, this concept could serve as an innovative tool to strengthen tax compliance in Indonesia. But how exactly does this receipt lottery system work?

The concept of using sales invoices as lottery tickets was introduced by the Taiwanese tax authority on January 1, 1951. The primary goal was to encourage and improve tax compliance among taxpayers in Taiwan. In its first year of implementation, the receipt lottery led to a 75% increase in tax revenue compared to the previous year.

The invoices used in the lottery are called tongyi fapiao, or uniform invoices. These are standardized documents issued for every business transaction in Taiwan, designed specifically for tax purposes. Only legally registered businesses are authorized to issue these invoices, making them a direct reflection of a taxpayer's compliance with tax regulations.

Most recently, on November 25, 2024, the Taiwanese tax authority announced the winning invoice numbers for the September–October 2024 period. A winner holding an invoice number that exactly matches the eight-digit winning number received a grand prize of 10 million New Taiwan dollars (approximately IDR 4 billion).

In each bi-monthly drawing, the tax authority selects five winning invoice numbers. While one invoice number wins the grand prize, four other numbers win prizes ranging from NT$200 (approx. IDR 100,000) to NT$2 million (approx. IDR 1 billion). Astonishing figures, aren’t they?

The value of lottery prizes under Taiwan’s receipt lottery program has gradually increased over time. Most notably, in 2011, the Taiwanese tax authority set the grand prize (Special Prize) at NT$10 million. To keep pace with technological advancement and promote administrative efficiency, in 2021, they launched the e-fapiao, a digital version of the previously paper-based uniform invoice.

The prize claim process is strictly regulated. Winners must present the original invoice (fapiao) that includes complete transaction details to claim their prize. However, not all fapiao are eligible for the lottery. Invoices that list government institutions, state-owned enterprises, public schools, or military units as the buyer are automatically disqualified from prize claims.

Notably, Taiwan, formally known as the Republic of China (RoC), is not the only country to implement a receipt lottery. Following its success, several other countries adopted similar systems, including Greece, Italy, Latvia, Malta, Portugal, and Slovakia. Yet, not all implementations have been smooth. The invoice lottery requires a complex, integrated system that links businesses and the tax authority in real-time.

Despite such challenges, the system is still considered a fun and innovative approach to promoting tax compliance. According to research by Professor Junmin Wan of Fukuoka University on China’s version of the fapiao lottery, in 2002, the government allocated 30 million yuan (approx. IDR 65 billion) in lottery prizes, while generating tax revenue of 900 million yuan (approx. IDR 2 trillion). It’s important to note that lottery winnings are also subject to a 20% tax.

However, the system is not immune to fraud risks. For example, business operators might withhold issuing fapiao and instead offer discounts to customers. There’s also the potential for fake transactions designed to generate fapiao, which could be exploited for tax credits or deductions from gross income.

Potential Implementation in Indonesia

So, is it possible to implement a tax lottery system in Indonesia?

Before answering that question, the first aspect to consider is whether the necessary infrastructure is in place to support such a policy. In this regard, Indonesia already possesses a foundational system that could be utilized: the electronic tax invoice system (e-Faktur).

The current tax invoice format in Indonesia holds the potential to function similarly to the fapiao used in China. The tax invoice code could serve as a lottery number to determine prize winners. Moreover, the existing invoice tracking system has been designed to prevent duplicate numbers, thus fulfilling the critical requirement of uniqueness in any lottery mechanism.

To illustrate the potential application, consider the performance of state revenue from this sector. In Q4 of 2024, government revenue from Value Added Tax (VAT) and Sales Tax on Luxury Goods (STLG) grew significantly by 8.6% year-on-year, reaching IDR 828.5 trillion. This substantial revenue reflects the high volume of transactions recorded using tax invoices.

From this amount, it would be useful to further categorize the transactions based on the type of invoice used—how many involved paper (hardcopy) tax invoices, how many used e-Faktur, and how many involved alternative documents treated as tax invoices under applicable regulations.

The next critical question is: Can all these invoice formats be classified as tongyi fapiao (uniform invoices) suitable for inclusion in a lottery system? This classification is essential to ensure that the policy can be implemented effectively while also maintaining fairness and integrity within the lottery mechanism.

Once the technical and administrative requirements are fulfilled, the next challenge lies in ensuring that taxpayers (VAT-registered persons) are interested in participating in the lottery program and in determining an appropriate prize value. The reward must be attractive enough to encourage broad participation, but not so large that it strains the state budget. As such, in-depth research and careful policy simulations are essential to strike a balance between public appeal and fiscal efficiency.

This consideration becomes even more critical when examined in light of Indonesia’s future fiscal outlook. In the 2025 Draft State Budget (RAPBN), the tax ratio target is set at 10.09% to 10.29% of GDP. Meanwhile, the National Medium-Term Development Plan (RPJMN) sets a slightly more specific target of 10.24%. This is slightly lower than the actual figure achieved in 2023, which stood at 10.31%. The projected decline reflects a tightening of fiscal space, suggesting that public spending will need to be managed more selectively going forward.

Fiscal, Social, and Legal Challenges

Amidst tight fiscal space, a key question emerges: Is it realistic for the state to allocate funds for a tax lottery, especially while striving to maintain efficient tax collection? According to the Ministry of Finance, the Indonesian government has consistently worked to keep the cost of tax collection below 1%. For comparison, Taiwan, which has long operated a tax lottery system, managed to maintain a cost of collection of just 0.84% in 2022. This demonstrates that incentive-based policies such as tax lotteries can be implemented efficiently, provided they are well-managed and supported by an integrated system.

However, beyond technical and fiscal considerations, there are other crucial factors—legal foundations and public perception. It's undeniable that some segments of the public still associate lotteries with gambling, which could generate resistance, especially in the absence of effective communication. It is therefore essential for the government to craft an appropriate narrative, clearly explaining that the tax lottery is not a form of gambling, but rather a compliance-driven strategy to promote transparency and tax discipline in transactions.

Issues of fairness and inclusivity must also be addressed, particularly regarding eligibility criteria for participants and prize recipients. In Taiwan, eligibility is not limited to citizens or domestic taxpayers; foreign tourists who make purchases and receive a fapiao are automatically included in the lottery. If Indonesia were to adopt a similar policy, careful consideration would be needed around public acceptance of allowing non-citizens to win prizes funded by public money. There may be public concern over the idea of foreign nationals benefiting from state-funded rewards.

From the taxpayer’s perspective, however, a lottery system could serve as a fun and engaging incentive. For those who diligently save their tax invoices, each lottery announcement could become a much-anticipated event. Beyond fostering better record-keeping and tax documentation habits, this system provides a tangible sense of reward for being a compliant taxpayer. After all, people respond to incentives, and a tax lottery can be one such effective instrument to promote voluntary compliance.

In conclusion, although not without challenges, implementing a tax lottery in Indonesia is a policy worth exploring further. If carefully designed legally, fiscally, socially, and technically, this approach could offer an innovative pathway to strengthening Indonesia’s tax system, particularly in enhancing taxpayer compliance. (KEN) 

 

Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.