Anatomy of a Clever Contingency

The government of Slovakia recently was reported (click here for the New York Times report) to have been having great difficulty collecting value-added taxes (basically, a sales tax) from many merchants, who are suspected by the government to be less than forthcoming in reporting their sales. The estimated loss from such merchant reticence is the equivalent of hundreds of millions of dollars. The government implemented a clever contingency in an effort to boost accurate reporting of sales, and thereby tax collection.

Each citizen of the country was allowed to enter a government-sponsored lottery that gives away cash and prizes. Getting lottery tickets is free … almost. To get a ticket, a citizen need only produce a sales receipt, containing a listing of the VAT, for an item purchased somewhere in the country. Each sales receipt turned in is worth one lottery ticket. The sales receipts then can be entered into a computer program designed to compare a merchant’s sales to the value-added taxes that that business is reporting. The program “also will tell [the purchaser] if a merchant has issued a receipt with a fake tax identification number, so they can report suspected "fraud” but it is unclear whether there are additional incentives for such reports.        

Why does the contingency work?  First, the required response is specified clearly: every sales receipt submitted results in one lottery ticket issued to the submitter.  Second there is no cost to the response by the purchaser, other than having to keep a receipt for purchases.  Third, the payoff is intermittent, indeed, it may be rare, but there always is some probability of reinforcement for turning in a sales receipt. Intermittent reinforcement is widely recognized by behavior analysts for its ability to maintain responding, as compared to a circumstance where every response is reinforced.  In this sense choosing a lottery as the basis for the system was a stroke of genius.

The contingency is not unethical—the purpose and intent of the contingency is straightforward, unless, of course the government doesn’t pay winners, which does not seem to be the case. To the contrary, it facilitates the government collecting what it is owed. Furthermore, ordinary citizens win in two ways: in having some likelihood of winning the lottery and in receiving the services for which the government is now more in a position to pay for. Perhaps you consider lotteries of any kind as unethical because they take peoples’ resources from things they need to pay for lottery tickets, but this one does not require that anyone buy a ticket.  Here, the person has already paid for a ticket by purchasing things he needed or wanted. No cash outlay.

Whether the contingency is diabolical or not depends on one’s perspective. It is a no-brainer to assume that the program is none-too-popular with the merchants who are not reporting or under-reporting their sales to avoid the VAT.  But that doesn’t make the program bad.  In fact, citizens are being cheated of services they are promised by their country due to the noncompliance of some merchants. Furthermore, involving people more directly in the tax process, “…increases both their compliance with paying taxes, and their happiness when they actually do pay.", according to Michael Norton, an associate professor of business administration at Harvard University and co-author of Happy Money: The Science of Smarter Spending.  He goes on to observe that the Slovakia plan “may indeed increase their involvement with and satisfaction paying taxes."  (According to the article from which the above quotations were taken, “Norton's research also showed that allowing people to simply express in which areas they would like their taxes to be spent – without the collecting agency being required to actually obey their preference – increased their tax compliance by 16%”) (see

This contingency leads one to ask just how much fraud could be reduced if more governments and other agencies were as creative, or to be more precise, as “contingent”?  Behavioral change occurs as a function of contingency change. Whether through design or happenstance, virtually every situation where behavior change is observed can be shown to result from a change in the conditions of reinforcement, that is, from the contingencies in place. Contingency changes are implemented by all of us every day. The Slovakian government happens to be implementing an especially creative contingency to alleviate a difficult problem.  Such a contingency probably wouldn’t work for every problem, but thinking creatively about how to rearrange or change environments to bring about behavior changes that benefit everyone in a society certainly has great promise for citizens everywhere. 

Posted by Andy Lattal, Ph.D.

Dr. Andy Lattal is the Centennial Professor of Psychology at West Virginia University (WVU). Lattal has authored over 150 research articles and chapters on conceptual, experimental, and applied topics in behavior analysis and edited seven books and journal special issues, including APA’s memorial tribute to B. F. Skinner.