Mongolian Taxation Authority had difficulty collecting the VAT, so they made several ingenious moves so that people would voluntarily pay for it.
They were able to receive VAT from big department stores, supermarkets, but kept losing out from small mom-and-pop operations. In order to pay a VAT you need to earn at least 10 million MNT (roughly 4,000USD) per annum. This is a small amount and basically all of the stores earn much more than that. Since 2016, in order to increase the revenue, MTA started implementing the following steps:
- Monthly lottery. Every purchase you make has a special serial number and you can win a lottery provided that you register the receipt via a special website or an app. This month you can win roughly 20,000USD (50 mln MNT).
- Every store needs to have a new cashier machine that can print out the special receipts. Also the store has to become VAT payer and register with the MTA to do that.
- Customers can complain to special hotline if the store doesn’t print out the special receipts.
- At the year end, a citizen gets reimbursed up to 20 percent of the VAT that she registered online.
What the MTA did was to make the regular people, the customers demand to receive the special receipts thereby forcing the companies and mom-and-pop stores to become a VAT payer.
- As a result of the lottery and the reimbursement, MTA was able to collect an additional 208 million USD worth of revenue (2016).
- Customers won 1.4 million USD worth of dollars from the lottery (2016).
- 620,000 citizens were reimbursed 13 million USD (20 percent).