The “lucky invoice” lottery
If you want to understand how the human mind works, don’t ask people what they think.
Observe all the irrational things people do despite the (massively) unfavorable odds.
In Portugal the law doesn’t require consumers to request sales invoices with their personal tax number.
So what happens is consumers usually don’t ask for official receipts or invoices when they buy goods or services. And a lot of businesses end deliberately under reporting sales so they can pay less taxes (or no taxes).
For example, small businesses like coffee shops, barber shops and auto repair shops do this a lot.
Which was why in 2013 the shadow economy represented around 19–23 percent of GDP.
Portugal’s new Prime-Minister Passos Coelho elected in 2011 was still locked in a painful austerity plan to cut public spending. His #1 job was to stabilize Portugal’s public finances.
(Important context: Before Passos Coelho was elected the country was saved from bankruptcy. All thanks to a €78 billion IMF-EU bailout package that required big public spending cuts and economic reforms).
So in 2014 the Portuguese Government decided it was time to do something to fight black-market activity.
But the Government came up with a creative way of solving the black-market problem. Instead of chasing tax evaders, the Government launched a VAT lottery called “Factura da sorte” (Lucky invoice).
The VAT lottery plan was simple: Ask for a receipt and you get a coupon and a weekly chance to win a luxury car via a weekly lottery.
The Government was mocked by the local press and by Political commentators.
Even Portugal’s most influential Political commentator at the time Marcelo Rebelo de Sousa (now President of Portugal) said, “the idea disgusts me!”.
The problem was, critics neglected something very important. Something intrinsically very Portuguese.
You see, any Portuguese citizen will tell you the opposite. But the truth is, Portugal is a very materialistic society.
And Portuguese folks love cars. Because cars are a status symbol. And driving around a Mercedes-Benz, a BMW or Audi is a way of showing friends, family and neighbors you’re doing well in life (Even if your Bank account balance says the opposite).
Also, Portuguese loooooooooove free stuff.
Which was precisely why the VAT lottery plan worked.
One year after the Plan was introduced the number of sales invoices with the consumer taxpayer number increased by 36.3 %. And one year later, they increased by 51.2%. Despite the (massively) unfavorable odds of winning a “free car.”
Between 2014 and 2016 the “Factura da sorte” plan cost the Portuguese Government only 4.275 Million Euros. During this period the Government gave away “for free” 105 Audi A4 (worth €35k each) and 12 Audi A6 (worth €50k each).
A simple way of solving a complex problem. And a reminder that changing perceptions is easier (and a lot cheaper) than changing reality.
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》”Dangerous” Ideas”
1/ Changing perceptions is easier (and cheaper) than changing reality.
In the Real World the choices we make are influenced by how they're framed and presented to us.
That’s why the exact same problem, thing or product if presented through different settings, situations or words can lead to different choices.
In psychology this is called the framing effect.
Some good examples of the power of reframing perceptions:
2/ Humans are creatures of emotions. And our biases, beliefs and impulses drive 95% of our daily choices.
Left-wing New Yorkers spending $10 on a popsicle to symbolically “eat the rich” is just another Real-World example that confirmation bias is real.
3/ Hunt for what consumers need and communicate a want.
Your pal,
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