
China: Crowdsourced tax enforcement - limmeau
http://www.bunniestudios.com/blog/?p=2269
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jpalley
In theory that's how it works - but it over-looks a price optimization that
everyone uses. Essentially, when I walk into a restaurant/business to buy
something, I'm in one of two situations:

a) I have some relationship with my employer whereby I need fapiaos to
essentially reduce my income tax (i.e. count my personal expenditures as
business expenses). Thus, I will ask for a fapiao.

b) I don't need a fapiao to write off income tax. Now, we play a simple
numbers game: Say there is a 10% chance of me winning some small percent of
money by receiving the fapiao. But there is a 100% chance that if I ask for
the fapiao the business will need to pay tax. So, we strike a win-win deal.
The business gives me a discount, that is, say, 50% of what the tax is. I pay
less. They make more. Everyone but the government wins.

Other notes:

a) The lottery on fapiao has been around for a while. Its not new.

b) The above deal is less and less common in big cities as more people use
UnionPay (debit cards) and businesses essentially assume that people will ask
for fapiao.

c) There are a few factual errors in the article. Some restaurants, yes,
provide a "stack" of pre-printed fapiaos. Most have a printer that is
essentially connected to the tax collection offices computer and can print at
the bill's value.

~~~
seanmcdirmid
As for (c), it depends on the city and even restaurant. Many places can't
afford fapiao printing machines, and so the government is more lax and lets
them use preprinted anonymous fapiaos. These are being phased out, but if you
leave the big cities you'll still see a lot of that, and even in Beijing we
get fapiao tickets at some lower end places.

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yaix
>>China’s clever solution is to make every fapiao a lottery ticket.

That's not "China's clever solution" but quite common. They had that in Mexico
already more than 10 years ago when I lived there (the cash register in stores
whould print out these "lottery numbers" onto the receipt).

The fapiao in the picture is from Guangdong, elsewhere I have seen only 100
kuai with scratch off fields, not ten kuai.

~~~
gurkendoktor
Taiwan also has a variation of this, being an even closer source of
inspiration than Mexico for China.

It's crazy - the cleaning staff at my dormitory was absolutely obsessive about
fishing each one of them out of the trash, even though the chance of winning
is terrible...a good indicator of how little some people's time is still
worth, sadly.

~~~
codemac
The worth of someone's time is not determined from how much they are paid for
that time.

~~~
gurkendoktor
Hm, what other conclusion would you draw from this?

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codemac
Simple: They think the possibility of earning more money for their time is
less than the possibility of winning the lottery.

It's a matter of desperation, not a matter of low worth.

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zrgiu_
_you are supposed to receive a stack of fapiao of equivalent face value._

In the past 9 months I've never received more than one of these _fapiao_ , if
they even gave it to me at all. Also, the prizes are pretty small, enough that
there isn't that much of an incentive to ask for these "lottery tickets". The
largest "prize" i heard about (because i've never seen anyone win) was about
the equivalent of $6 USD.

~~~
seanmcdirmid
It used to be more common in the past: you buy something, and the fapiao
(certified tax receipt) would include some sort of scratch off thing that was
like a lottery; so you had some incentive to collect your fapiao and
preventing the department store from low balling their taxes.

Store owners are not supposed to recycle unclaimed fapiaos, that is definitely
illegal, and many companies who follow the law to the letter (like Starbucks)
make it very convenient for you to exchange your xiaopiaos (normal receipts)
for one fat fapiao in bulk, since they are not gaining anything by not issuing
a fapiao.

Likewise, Microsoft (my employer, an American company) doesn't require us to
play the fapiao game for most of our benefits. However, we need fapiaos for
any expenses that occur in China, while there are a few benefits that require
fapiaos (a travel and gym benefit) that are easy to get and one foreigner-only
benefit where we can get back our tax on rent if only we could ever get our
landlord to issue a fapiao (unlikely, they would just jack up the rent for the
taxes they weren't dodging).

And let's not get started on getting the name right for the fapiao. It must be
in Chinese and it must be the official name of our company. I think for
Microsoft China its something like Microsoft (China) Limited, but all in
Chinese characters, and its bad if you can't write that down exactly right.

[Edit] Let me describe the fapiao game: your company (usually a Chinese one)
low balls your salary (say 2 or 3K RMB a month) but allows you to claim lots
of personal expensive as business expenses. Even more fun: some require you to
collect fapiaos but don't reimburse you for your expenses (universities do
this a lot!). Fapiaos now require the name of the company that will be
claiming the tax benefit so you can't just exchange them with your friends,
meaning you need to be diligent about collecting fapiaos. Taxi fapiaos are the
easiest, as they don't require names (so you can collect them and exchange
them with friends if you want).

~~~
PakG1
If you're getting only 2 or 3K RMB per month, I think that's seriously
robbery, even if you do have the ability to claim expenses on everything else.
That's what only new graduates get, and low-level Chinese university new grads
at that. I have a friend who just moved from IBM to Microsoft recently (we're
both in China). Microsoft definitely pays more than that. I have no idea where
you're getting this 2 or 3K number?

To the gp, I usually don't get fapiao if I don't ask for it, but it sometimes
comes. I always get it if I ask for it, or they offer me a Pepsi on the house
or something to avoid giving me fapiao. So it's always in play, as far as I
can see.

~~~
ephermata
I read that as "the employer pays you 2K or 3K RMB less than what it otherwise
would" , not "the employer pays only 2K or 3K RMB per month."

~~~
PakG1
That would logically make much more sense.

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ashconnor
If you skim read like me then you might not have understood how this works:

1\. Companies pre-pay tax by buying vouchers called `fapiao` which the article
states, costs 10-20% of the kuay (Chinese yuan) value. (I assume rates differ
depending on overall income of the business).

2\. A transaction takes place and the customer pays the business in yuan and
receives one of these fapiao tickets as a receipt. Incentives to get this
ticket is that is acts as a lottery ticket also, with modest prizes.

3\. The tax enforcement is therefore 'crowdsourced' because if any customer
doesn't receive this ticket then they can report the business.

4\. Any fapiao tickets leftover can be used for tax rebates.

The biggest problem I see is that businesses have to prepay tax which is
'estimated'. If this was too high then it could cause problems for the
business's balance-sheet.

Other problems the article details:

\- Not much incentive for people to collect their fapiao tickets

\- Bribes, fraud and stealing by the business due to their incentive to keep
tickets

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kalleboo
In Greece they crowdsource the tax enforcement by requiring everyone to submit
a stack (to a certain amount of euros) of purchase receipts with their tax
filing. This is to ensure that customers always ask for receipts, so that
stores always enter everything into the register (which goes into the store's
tax filing).

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anamax
> This is to ensure that customers always ask for receipts, so that stores
> always enter everything into the register (which goes into the store's tax
> filing).

It's fairly easy for a store to use a register that has nothing to do with the
store's tax filing.

Receipt matching would defeat that, but only if stores submitted their
receipts.

However, you can use customer receipts to estimate a store's revenue, but that
has nothing to do with whether or not a register is involved.

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cploonker
With small tweaks i think all of the shortcomings mentioned here can be taken
care of. e.g. provide much larger tax rebates as lottery instead of actual
money. These rebates are much more beneficial to the rich who spend the most
and are the ones who evade taxes the most.

~~~
liuming
Then most of the ordinary consumers(people) will confuse and lose the
motivation to ask for this receipt. Because a lot of Chinese people don't,
don't need and don't know how to fill tax return.

The government don't want to do that as well, because if then they are
indirectly educate people there is a concept of tax return exists, which is
most people don't aware of. That is a big chunk of money government steal away
from people every year.

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Estragon
The lottery aspect of it makes me think of a human-powered, authoritarian
bitcoin.

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kylebrown
Fascinating! In the US lottery is a tax collection, but in China tax
collection is a lottery.

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stupandaus
Small Chinese correction: 元 is yuan2. Kuai4 is 块. Kuai4 is just a measure word
for Qian2 (钱).

