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How China got businesses to pay taxes: scratch-n-win tickets

A decade ago China was losing about $158 million a year in tax revenues. World Bank figures show that China has steadily increased its tax revenues since 1994.

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There are 55 ways you can get the death penalty in China, and it once included killing pandas and tax evasion. So when it comes to setting trends for positive reinforcement, China rarely comes to mind. 

A recent study, however, shows that China's quiet experimentations with carrot-and-stick measures throughout the past few decades has not only paid off, but has set off a trend across the nation and across Asia, even catching the interest of some experts in Japan and America. China’s most successful measure? A lottery receipt system to keep track of transactions and get businesses to pay their taxes.

Positive reinforcement programs, like China's lottery receipt program, can make governance better, say experts like Richard Thaler, a professor of economics and behavioral science at Chicago University's Booth School of Business. Typically, the governments use "exhortation and fines" to make citizens behave, but, "these efforts are usually ineffective," he wrote in an oped. Though lotteries like the one in China are only one way positive reinforcement can work – England got its citizens to recycle 35 percent more by allowing them to earn points for free merchandise – Mr. Thaler writes, "The moral here is simple. If governments want to encourage good citizenship, they should try making the desired behavior more fun." 


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