Labor says the Coalition's small business lunch tax concession would cost the budget $1.6 billion per year. (ABC News: Jeremy Story Carter)
In short:
Labor has enlisted Treasury to cost the Coalition's small business tax credit for business lunches, saying it would cost the federal budget $1.6 billion a year.
The Coalition has not published its own estimate, but says it has been costed by the Parliamentary Budget Office and the cost is "less than $250 million".
What's next?
Shadow Treasurer Angus Taylor says he will write to Treasury Secretary Steven Kennedy for an explanation of why the costing was produced, calling it "an egregious politicisation of the public service".
Labor says the Coalition's election policy to offer tax-free lunches would cost the federal budget $1.6 billion a year, enlisting the Treasury in a political attack on the small business support measure Treasurer Jim Chalmers says would "smash the budget".
The Coalition has not produced an independent costing for its tax break, which would allow small businesses to claim up to $20,000 a year off their taxable income for meals with staff or clients.
But on Tuesday morning, Shadow Treasurer Angus Taylor said the policy had been costed by the independent Parliamentary Budget Office and the cost was "under $250 million".
Mr Taylor said it was "an egregious politicisation of the public service" to use Treasury to cost an opposition policy, and said he would write to Treasury Secretary Steven Kennedy for an explanation.
"It is absolutely at odds in our view with the APS code of conduct … using them in clear political terms to attack the opposition … Steven Kennedy will need to answer why he has done this."
Mr Chalmers said Mr Taylor's response was "unhinged" and accused him of "losing the plot," saying he had the policy costed because it was "a substantial risk to the budget".
The Coalition has also offered only partial details on how the Australian Tax Office would administer the plan, originally suggesting it covered "food and entertainment" but subsequently clarifying it did not include golf days or other leisure activities.
Peter Dutton promises tax-free lunches in second campaign launch
Photo shows Peter Dutton Kirilly Brisbane campaign
The Treasury costing sourced by Labor assumed 2.6 million actively trading small businesses would be eligible to claim the tax credit, but that not all would do so, with an average claim of $2,500 per eligible business per year.
A Parliamentary Budget Office costing for a similar proposal to the Coalition's, provided to The Australian Financial Review last week, yielded a cost several times smaller, coming in at just over $100 million per year.
The huge discrepancy could be explained by different assumptions about how much businesses would claim, or which businesses would claim.
For example, the cost would be much smaller if assumed that only profit-making businesses would be likely claim the tax credit, or if businesses with a single employee were excluded from the calculation.
But alternatively, an assumption that businesses would claim close to the maximum $20,000 could produce a dramatically larger cost, and Treasury advised the government there was a significant cost risk because the offset would be hard to police, opening the risk that businesses could illegitimately claim personal food expenses.
"The Liberals' taxpayer-funded long lunches policy would smash the budget," Mr Chalmers said.
"This is why he won't come clean on costings … We still don't know what Peter Dutton would cut to pay for it."
Shadow Treasurer Angus Taylor repeated on Monday the Coalition would release its costing before the election.
"That's the custom. That's what Labor did before the last election. We'll do exactly the same," he said.
"We want to see small businesses, hospitality businesses, cafes, restaurants, hotels and others, doing well at a time when we're seeing record levels of insolvencies."
Spending row ramps up with public servants at the centre
Opposition Leader Peter Dutton pledged he would reduce public spending in government, but said the specifics would be worked out after the election.
"We need to sit down and look … We'll do that in government," he told the ABC's Insiders.
"If we find wasteful spending, our intent is to cut it. That will result in, obviously, an overall reduction in government expenditure."
Dutton vows to cut 'wasteful' government spending
Photo shows A close up shot of a man in a suit and glasses.
Mr Dutton singled out the government's expansion of the public service headcount by 36,000, which he said cost $6 billion a year, promising cuts.
"We're not going to allow the public service to balloon … We've been very clear, we are not going to have the public service sitting at over 200,000 on Labor's projections … It's obvious that there's a correlation between a bloated service and a lack of productivity."
Labor has recorded budget savings over the course of this term by prioritising public servants over more expensive private consultants.
Katy Gallagher, the minister for finance and the public service, said public service cuts would mean "simply that people will see reduced services".
"It's easy to say you're going to wind back public service jobs … He also chooses to say in Canberra, so he gives a fair kick to Canberra when we know that most of those jobs are out in the regions, they're in the small towns, they're in the Centrelink, Medicare, service delivery agencies."
