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The Globe and Mail

The sex expense deduction: Not that far-fetched

Marina Adshade is an economist at Dalhousie University. She writes regularly on the economics of sex and love on her blog Dollars and Sex

A cab driver told me many years ago that when economists occupy the Toronto Convention Centre, the prostitutes take the weekend off. I have now been around long enough to know that that probably isn't true; there are profits to be made even when academics meet.

But the connotation is, of course, that business travellers make up a significant portion of the city's market for sex despite being both illegal and stigmatized. In countries that have legal brothels, interacting with the sex trades has become a larger part of the corporate culture. Corporate dollars are going not only to expensive conference hotel room parties with (scantily clad) paid guests, but also to entertaining clients in brothels, offering staff brothel visits as Christmas bonuses and oiling labour relations with sex bribes to union leaders.

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Canadian policy makers may already feel that they will have their hands full regulating the sex trade if decriminalization ever becomes a reality but there is an additional consideration to add to their list. They will need to determine if sex trade related expenses should be tax deductible for Canadian companies.

This may sound ridiculous, but other countries like Australia and New Zealand that have decriminalized prostitution do allow corporations to write off visits to brothels if the expense is business related. After all, corporations get a tax deduction if they take their best performing executives golfing for the day, why not if they take them to an upscale brothel instead?

There are many reasons why this may not sit well with Canadians, but I would like to suggest one reason that is perhaps not obvious. Allowing tax deductions for sex expenses gives firms a greater incentive to spend money in those venues. When networking in the business community includes brothels visits, female employees are cut-off from participating in activities that might have helped them climb the corporate ladder.

In 2009, the Equality and Human Rights Commission in the United Kingdom issued a report on gender imbalances in the financial sector, where women earn on average 60 per cent of their male counterparts' annual gross income and 80 per cent of performance-related pay. That report finds that part of the earning gap in the banking sector can be explained by exclusion of women from social networking opportunities with clients because those opportunities often include trips to lap-dancing clubs or hostess bars where the women either didn't feel welcome, or were explicitly not invited.

Since decriminalization of prostitution in Australia, where networking at sex venues has become a larger part of the corporate culture and where corporations can legitimately write off sex expenses, there has been a decline in the number of companies that have at least one woman on the board of directors and the share of women who are executives had fallen behind Canada and the United States.

The effect on corporate culture of tax deductions for sex expenses, with the inevitable blossoming of a sex trade that caters to corporate entertainment, is just one of the many broader economic implications of the decriminalization of prostitution that will need to come to the table.

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