Peurto Rico Turns to Lottery to Aid Tax Revenues

February 8, 2011 Taxation in Peurto Rico

Bingo numbersThe Treasury Department of Puerto Rico intends to instate a nationwide lottery system in the hopes of boosting tax revenues and attempting to reduce the severity of the country’s underground economy.

Last week during a press interview in his office, the Governor of Peurto Rico Luis Fortuño revealed that a new sceme will be put into place by the Puerto Rioco Treasury Department, whereby every sales invoice issued throughout the country will be eligible for a prize draw of up to USD 1000.

The program will be rolled out nationwide on July 1st, and will require all retailers and service providers to use a state-issued tax receipt machine. Each receipt will contain a 10-digit lottery number, making it eligible for a prize in a regular televised winning-number draw. The retailer’s copy of the sales invoice will be required to be kept, for winning prize claims to be valid. Retailers found to be withholding receipts from customers or not retaining their copies will be charged USD 100 per offense, and those refusing to use the issued machines will be fined USD 20 000. During the interview, Luis Fortuño claimed that the new system will work because taxpayers will have a personal stake in ensuring that retailers adequately report their sales to the Treasury Department. The system should also be in reducing the number of transactions occurring throughout the country’s underground economy, which has been estimated to be 27 percent larger than the overall economy.

The Treasury Department currently expects to spend approximately USD 16 million to set up the program, including the cost of issuing the printing equipment. It is estimated that the system will result in a USD 400 million boost to tax revenues.

The Governor has said that the prize for the lottery is currently set to USD 1000, although in the future an additional grand prize of an automobile will be added, along with four chances to win USD 500 and ten chances for USD 100.

A pilot-program for the lottery system has already been run in the country’s second most populous city Ponce. The results were lackluster, with none of the eight drawn winners coming in to claim their prize so far. However, the Governor is hopeful that a large media campaign will increase the awareness and effectiveness of the program.

Photo by Leo Reynolds