Abstract

Ensuring compliance with the Value Added Tax (VAT) is a major challenge for tax administrations in many low- and lower-middle income countries (LLMICs). The selfenforcing nature of the VAT often breaks down at the point of sale to the final consumer. Receipt lotteries have been introduced as a tool to incentivize customers to request formal receipts for their purchases, thereby strenghtening enforcement. However, empirical evidence on the effectiveness of such lotteries remains limited. In collaboration with the Tanzania Revenue Authority, we implemented a receipt lottery and evaluated its effects using a combination of administrative tax data and original survey data. The administrative data show that the lottery led to significant increases in recorded sales and VAT liability among VAT registered firms. The survey data reveals that the customers are well aware of the lottery and respond by requesting receipts more frequently. However, firms often counter this increased demand by printing fewer receipts when customers do not explicitly request them, partially mitigating the lottery’s effects.