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Wednesday, 16 October 1985
Page: 1323

Senator BOLKUS —I refer the Minister representing the Treasurer to today's edition of the Australian Financial Review and particularly to the Canberra Memo comment and an item therein where it is claimed that the private sector is developing contrived schemes to evade the intent of the Government's recently announced taxation measures to cover the free lunch. I mention particularly that part of the item which refers to one major accounting firm which is reported to have paid an up-front fee of about $5,000 to a favourite restaurant and is now busily eating its way out of credit. Will the Government look at these sorts of alternative and contrived schemes in its framing of the legislation to cover this tax avoidance mechanism?

Senator WALSH —I have seen the reports to which Senator Bolkus referred. Similar reports have been published over the last couple of weeks. The important thing to note is that they draw attention to the essentially fraudulent nature of the business lunch and of the beneficiaries of the business lunch. They are resorting to such practices as backdating the receipts, paying an up-front fee and so on. In saying that, I know that business lunches are not entirely fraudulent, but they are essentially fraudulent. It is that essential fraudulence which the Opposition apparently, from its statements, seeks to preserve.

The Opposition, that group of economic Calvinists, as they would have us believe under its new leadership, is in fact backing a free lunch led economic recovery. It believes that a free lunch led economic recovery is a viable and sustainable basic economic policy. That is yet another of the contradictions which at least for the time being co-exist within the Liberal Party.

For that minority of free lunches that should not be regarded as fraudulent a minor case can be made that such lunches are an expense incurred in the earning of income. It is impossible, however, to separate the two. If one is going to argue that expenses incurred in the earning of income, even though they are difficult to identify, must be deductible, one must also consider the question of travel to work. That is not terribly difficult to isolate, but no government has ever allowed it as a deduction from taxable income on the grounds that travel to work is unarguably essential for the great majority of people. As far as I know the Opposition is not arguing for travel to work to be a deduction from taxable income-the cost to revenue of doing so would be extremely high-but there can be no real doubt that for the vast majority of employees it is an unavoidable expense incurred in the earning of income. So there is nothing new about not allowing as a deduction all expenditure which could conceivably be regarded as expenditure incurred in the earning of income.

In this case, as I have said, essentially the free business lunch is a fraudulent and contrived operation, a judgment which is confirmed by the sorts of reports to which Senator Bolkus referred. It is not feasible administratively, on either the pure grounds of what is possible or what is an acceptable cost to bear in pursuing the amounts involved, to separate that small component which might be regarded as genuine from the very much larger component which should be regarded as essentially fraudulent.