Instant lottery innovation, tax compliance and herd effects, an impact assessment in Brazil

Abstract To mitigate tax evasion, the use of lottery awards is an important policy. In December 2019, Receita da Sorte a daily and instantaneous lottery was introduced, in a Brazilian state. This article aims to analyse the impact assessment of the new award program and the traditional. The approaches are directed to the taxpayer behaviour awarded and to his municipality, looking for the herd effect. This study uses a difference‐in‐differences model. The response variables are the number and monthly value of electronic invoices issued to beneficiaries. The database is composed of fiscal invoices issued from January 2021 to May 2023 and contains 47 million observations on 3,4 million taxpayers. The treatment group is made up of the awards citizens. The results show that the Receita da Sorte has 227% more effect in number of invoices and 166% more in value than the traditional monthly lottery. Additionally, a subgroup within Receita da Sorte exhibited behaviour resembling gambling addiction, where the effects appeared amplified. In the municipal‐level analysis, the herd effect was observed. For public policy implications, the analysis corroborates the use of the instant lotteries to increase citizen engagement.