Incentivizing Compliance: Lessons from Taiwan’s Receipt Lottery

Like most nations, Taiwan loses tax revenue from shops who only accept cash and don’t provide receipts.

Taiwan fights back with an innovative solution: receipts double as lottery tickets. Every two months, citizens share a prize pool of NT$2-3B, with several top prizes of NT$10M (~US$300K). A coffee shop that doesn’t provide receipts will lose customers to the shop that does.

Rather than simply punishing non-compliance, Taiwan designed a way to incentivize compliance. Sales tax revenue reportedly increased by 75% in the first year.

There’s a lesson here for anyone running a compliance program. Should we spend all of our budget chasing the few who violate our standards? Or perhaps spend some of it on incentivizing the masses who want to do the right thing?

Beware public shaming

In this podcast, Julia Marcus of Harvard Medical School tells us that shaming people who don’t wear masks or keep their distance will not help solve the pandemic.

She explains that there is a difference between public shaming and the more gentle peer pressure of using social norms. Social norms are the positive side of “everybody’s doing it”, making people feel safe to follow the herd (and unsafe to leave it).

Explaining a social norm to a person is a powerful form of nudge. It’s something that we can do in our organizations to create the right culture. For example, if we want to change the behavior of those who wait until the last day to complete their online ethics training, we can share the fact that 90% of their colleagues complete their training 1 week or more before the deadline. This is more likely to have a positive effect than publicly shaming them for completing their training on the last day (perhaps by publishing their names on the intranet).

There is another danger to public shaming: we risk creating a new, undesirable social norm. When people see others having fun at the beach or at a bar, partying without a mask, they might want to do the same. When employees see that many of their colleagues wait until the last minute to complete their training, they might think “why not”?

Public shaming not only feels wrong, it can also prove to be counterproductive.