One of the more important challenges for running a successful modern nation-state is figuring out an answer to the question of tax coverage.

The vast majority of people believe in at least some taxes, and practical statesmanship sees that outside of a few rare cases (a state controlling natural resources), you need to have decent tax coverage to fund your treasury and run your administrative programs.

Again, this question is totally orthogonal to what should be taxed and what tax rates should be. Regardless of where you stand in political opinion and practical evaluation on those questions, if a country has poor coverage, they stand to get in lots of trouble. My personal opinion from the history books is that a main contributing reason to the German Empire losing World War I is having poorer tax coverage than the Allies.

Taiwan, and indeed, much of Asia had and has poor tax coverage. Again, it's not about the rates -- it's about getting people to pay the rates. In a country where there's many more small vendors and independent shops, it's easy for people to artificially decrease their revenues.

Most of the time, governments try to combat this with a very stick-oriented approach, with penalties and problems for people who don't adequately report, with licensing and tracking and things like that.

But Taiwan took an interesting and novel approach to getting their tax coverage up -- they print lottery numbers on every official receipt.

Every two months, there's a drawing, and you have a chance to win a lot of little small amounts (twenty bucks here, forty bucks there) and there's a grand prize.

The end result? People love these receipts, and go out of their way to ask for them all the time. I was surprised that even a lot of semi-independent type places that could otherwise have gotten away with no formal receipts employ this practice.

It appeals to incentives, which from a systems approach is well-worth studying. If you've ever seen a fast-food restaurant with a sign, "If we don't give you a receipt, your meal is free," then you're looking at the private version of this phenomenon. Quick eats places have a strong vulnerability to having the staff sell a meal, but incorrectly ring it up on the register and pocket the cash.

The solution? Make people want the receipts, and then the customers will enforce the anti-theft measures for fast food restaurants, and enforce the tax coverage at uncovered retailers and restaurants for the government.

The point, of course, isn't about tax coverage or anti-theft measures at restaurants. Which is

It's about incentives and thinking broadly about how to make things run the way you want them to run.

It's a natural human temptation to go all on rants and tirades, make threats of penalties, and double down on enforcement if things are being done wrong under your umbrella. But oftentimes, some creativity and thinking about "carrot" incentives can do a world of good.

And more than that, sometimes you don't even need to incentivize the behavior of the people you want to change -- you can incentivize the people they interact with, and watch how your goals are met a healthy dose of third-party carrots.