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Thursday, 26 February 1987
Page: 804


Mr HAND —Madam Speaker--

Opposition members interjecting-


Mr HAND —I have an updated list. It is much more accurate than the one I had the other night. I have had a lot of phone calls. I am starting on honourable members opposite next, so they should be careful. I ask a question of the Minister Assisting the Treasurer. Is he aware of a tax evasion rort known as `creaming'? Is it a fact that some businesses do not disclose all of their turnover and that proprietors pocket some of the cash and tax is thereby evaded on this income? What can be done about this rort? Those opposite should not yell too loudly or they might find out that this affects some people.


Mr HURFORD —I can tell the honourable member for Melbourne that I have heard of creaming. It is, as he described it, a rort. It is the creaming off of cash in such a way that it is not included in taxable income. As an illustration of one of the industries in which this happens I will use the hotel industry. What should go from the cash till into the bank and be recorded properly for taxation purposes partially goes into the pocket. It has been brought to my notice that, to add insult to injury, in that industry hotel brokers, when seeking to sell a licence, often add back the amount that has not been included in taxable income-for the obvious reason that they wish to show what the real profits and taxable income should have been and increase the asset value of the licence accordingly.

The honourable member asked me what can be done. I assure him that although in the late 1970s and the early 1980s the Australian Taxation Office was seriously deprived of the necessary resources to address this sort of problem, since this Government took over the Tax Office resources have been increased enormously and the cash economy problem is now being addressed properly. As somebody who knows a little about tax consultancy, I can also tell him that anybody who is indulging in this particular practice is doing so very foolishly, because we now have more tax auditors and tax investigators, and when a tax investigator looks into a problem such as this he looks at the net worth, the net assets, of the person in question seven years ago and that person's net worth today. The increase in net worth then has to be reconciled with what has been included in that person's tax return. Where that reconciliation is not apparent the onus is on the person concerned to show where that extra income came from. There is a lot of noise from the opposite side of the chamber, probably because honourable members opposite recognise that one of the usual explanations is that there has been a cash flow from the bookies. All I can say is that, from my experience, if that was the real answer there would not be any bookies in business today. We are addressing the problem. It is a serious one, and I thank the honourable member for drawing it to the attention of the House so that we can show, in the way that I have done, that creaming is a stupid activity and that people indulging in it will be caught up with one day.