Hi5015 : Legal Aspects Of Assessment Answers

Question: 

Answer:

Description of the company

The industry the company operates in: Coca-Cola also known as Coke is a carbonated soft drink that is manufactured by the Coca Cola Company. Coca Cola operates in the beverage industry.

Number of staff in Australia: The total number of employees in Coca Cola as of year 2017 is 61,800.

Number of staff globally: Since the very inception of the organization, the company has generated number of employment opportunities. Presently the organization has given employment opportunity to more than 700000 people across the globe (Linkedin, 2018).

Location of global headquarters: The headquarters of company is located in Atlanta, Georgia, United States (Coca-cola Company, 2017). It is one of the leading companies in the world that operates in different countries.

This paper will focus on the legislative regulatory framework and the treaties, conventions or agreements that influenced the company in terms of operating in Australia. The major focus will be on corporate tax, GST, competition laws, environmental laws and the product liability regulations. In addition, Australia-United States FTA – AUSFTA has also been discussed.

Discussion

Australia is the sixth largest country of the world and Multi-National Companies from across the world are entering Australia for conducting their business. Coca Cola is one such leading company that entered Australia for selling its products. Since then many innovations has been adopted by Coca Cola in order to compete in the market as well as to satisfy the needs and demands of the customers. Coca Cola is a multinational organization and as a result the organization has to survive many regulatory frameworks in the foreign countries. Every country has its own set of regulatory norms that apply on the domestic as well as international businesses. The main aim of such legislative regulatory norms is to control the market conditions as well as to safeguard the interest of the domestic businesses as well as to protect the rights of the customers.  This regulatory norms help to govern the market conditions in the favour of the citizens, businesses as well as the country as a whole. There is a legislative regulatory framework in Australia that has to be followed by every multinational corporation even Coca Cola needs to deal with such regulatory framework so as to operate successfully in the country. Coca Cola in this context has to follow the tax regulations and the Australian business and environment laws (Kotey, 2014). Dealing with the taxation of multinational companies is a challenging task for the countries as the main purpose of such taxations is to make sure that fair competition is maintained in the market as well as no business is over exploited or over benefitted from the tax regime of a country. Some of the major taxes and laws have been discussed below:

Corporate tax issues

The corporate tax in Australia is applicable on domestic as well as multinational corporations. Companies such as Coca Cola that are foreign companies and doing their business in Australia also needs to pay corporate tax to the Australian Government. In addition, Coca Cola originates from the country (United States) that also participates in the arrangement of international double-tax. The corporate tax of Australia on Coca Cola is 30 per cent that is competitive in comparison to other economies such as China, Japan, France, India, Germany and the US. (Blouin, 2012).The lower corporate tax in Australia is one of the important factors that helps the company is operating in Australia. It is especially helpful for Coca Cola in expanding in Australia and locating new plants and equipment (The Conversation, 2017). The investment decisions of Coca Cola are positively influenced by the corporate tax (PwC, 2017). There are however other countries that have corporate taxes lower than that of Australia. Such countries are an attraction for foreign direct investment for leading multinational companies.

Goods and Services Tax (GST)

Goods and services tax is a broad based tax that has been applied in Australia since 2000.  The GST in Australia is levied at a rate of 10%.  The GST has both positive and negative impacts on Coca Cola. GST helps Coca Cola in reducing its cost of production as with the introduction of GST Coca Cola does not need to pay any extra charge for moving and calling goods around the country. Coca Cola has to only pay the natural price on the moving of their goods. Further, the goods and services tax will negatively affect Coca Cola because of the negative impact of GST on functions such as advisory, engineering and consulting that will make these services expensive (Breen, Bergin?Seers, Roberts, & Sims, 2002).  GST has made the consulting and advisory business expensive which is an important part of Coca Cola’s business. The company has to seek consultation from different organizations in context of finding the potential human resource along with finding ways for expansion (Selvakumar, Looter, & Irudhayaraj, 2015).

Apart from the taxes discussed above there are some laws that have to be considered by Coca Cola for operating effectively in the Australian economy. Some of the most important laws have been discussed below:

Competition laws

Australia has a statuary framework that ensures that there is a fair trading for both the customers and the businesses. Australian Competition and Consumer Commission (ACCC) is responsible for administering and enforcing the laws related to competition and consumers. This authority enforces a number of regulations on foreign companies in context to their marketing and promotion. The ACCC laws and regulations have a huge impact on the marketing and promotion of foreign companies like Coca Cola. Coca Cola cannot choose to publish or broadcast any advertisement that misleads the customers. For example:  Coca-Cola South Pacific Pty Ltd (Coca-Cola) is the organization responsible for marketing the Coca Cola products in Australia. One of the advertisements of the company was banned by the authority and Coca Cola was ordered to publish a corrective advertisement on the “Motherhood & Myth-Busting advertisement” (Australian Competition and Consumer Commission, 2009).

Environmental law

Further, there are environment laws that have an impact on manufacturing of Coca Cola in Australia. These environmental regulations are discussed below:  The Commonwealth powers are given to states for regulating the environmental issues. Australian Consumer Law (ACL) or the Commonwealth is a law that regulates and manages the pollution, contamination, natural resources and land use. The large MNC’s such as Coca Cola establish their manufacturing plants in the country but for this are obliged to follow a number of regulations (Gunningham, 2011).

Coca Cola has to use new technology that can help in reducing its carbon footprint. This will significantly increase the cost of the organization but will help Coca Cola in becoming a socially responsible foreign company in Australia. The industrial emissions of Coca Cola in water, land and air are prohibited and Coca Cola needs to secure a license for any waste emission. In addition there are a number of regulatory controls on the use of hazardous materials, noise and storage.

Product liability regulation

There are product liability regulations on foreign companies in Australia.  Australia has the regulatory framework for regulating the safety of the products that are being manufactured and sold in Australia. Australian Competition and Consumer Commission (ACCC) enforce these regulations on the foreign companies. The major aspects that are focused under the product liability regulation include pricing, importing and exporting, fair trading, inventory management and suppliers (Australian Government, 2018). Under this regulation Coca Cola has to comply with the trading laws that are established for protecting the business and the customers. In addition, the packaging and labelling of Coca Cola’s products will be under the check of the authorities. For example: the design of the label should comply with the CCA (Competition and Consumer Act 2010) according to which  companies cannot give false, misleading or deceptive information to the customers(Australian Government, 2018).

Treaties, conventions or agreements

Treaties and agreements play a major role in deciding the pattern of the economies. Agreements between the countries have a great impact on the business and environment laws of an economy and hence, a major emphasis is given to treaties and agreements taking place between nations. World Trade Organization (WTO) plays a major role in this. WTO is an international body that helps to counties to negotiate over global agreements. Because of such agreements many subsidies are also provided to businesses in order to grow and expand. Today because of the treaties and agreements globalization has extended to a great extent, and almost every country in this world is connected or dependent on one country or the other as no country is self-sufficient. Almost every country indulge in one or the other form of bilateral or multilateral agreements whose direct impact is seen on the trading as well as business pattern of the countries. With the help of such treaties and conventions many economies have become liberalized. United States is one of the most developed countries and it has indulged in many bilateral and multilateral treaties with many economies globally.  Australia and United States have also agreed on such treaties and agreements that bind them strategically.

Australia and the United States are allied friends and partners. This indicates that Coca Cola will get the support and assistance of the US in terms of expanding the business in Australia. Coca Cola will easily get the government support and assistance for legal work and requirements. The robust relationships of both the nations are underpinned by the shared interests, values and cultural affinities. The free trade agreement between both the countries has boosted the overall export between the countries to over 100% since 2005.

A treaty can be defined as the agreement under the international law entered by international organizations and sovereign states. A treaty can also be known as an international agreement, convention, pact, protocol or exchange of letters between countries. A treaty can be referred to by a number of names such as international agreements, international conventions, final acts, pacts, charter, accord etc. It is a formal agreement between nations that are also the primary sources of international law. In simple words, a treaty is an agreement that is signed formally and is also adhered to by the countries involved in the agreement. A treaty can be both bi-lateral and multilateral. A bilateral treaty is one that is between two parties and a multilateral agreement is one that is between two or more parties. There are a number of treaties or free trade agreements (FTAs) that are signed between Australia and other countries that benefit the Australian producers, exporters and importers. FTAs have opened many opportunities in front of the countries and have helped to a great extent to liberalize the economies. One of the bi lateral treaties between the US and Australia is the Australia-United States FTA – AUSFTA that is discussed below in detail.

Australia-United States FTA – AUSFTA is one of the free trade agreements between Australia and the US. This agreement underpins a bilateral economic relationship between the US and Australia. This treaty focuses on the importance of deep economic engagement of Australia with the US. AUSFTA plays a crucial role in facilitating the commercial relationship between the two countries. AUSFTA is a mutual benefit model. This particular treaty has impacted the business of Coca Cola in Australia (Weatherall, 2015). This treaty helps in business integration, research and innovation. The AUSFTA has attracted investment from Coca Cola in Australia as this agreement helps companies from the US in realizing their synergies in material sourcing, technology, information technology, and product development. In addition Coca Cola has also experienced lower tariffs on exports. This particular agreement benefits Coca Cola as it encourages the company to continue to invest in Australia by setting up new plants in the country (Chrysostomos, 2015). A consultative mechanism in AUSFTA enables the officials of Coca Cola to freely discuss the functioning of the agreement along with the ways and policies that can help Coca Cola to grow its business in Australia. In addition,  efforts such as the introduction of E-3 Visas is also one of the commendable steps which is strengthening the relationship between the two countries – the US and Australia, and the leading MNC’ s such as Coca Cola are gaining the advantage by sharing and using each other’s resources and potential for  expanding their business. E-3 Visa is the visa available to Australians who are seeking work in the United States.

Apart from the above discussed fair trade agreement between the US and Australasia there are treaties that have been signed such as the Agreement between the Government of Australia and the Government of the United States of America related to  antitrust and cooperation matters. This agreement seeks for enhanced information sharing and cooperation between the two nations on several aspects such as consumer protection, enhanced cross border cooperation particularly in consumer protection area. Therefore this agreement will ensure that the consumers of Australia are protected and Coca Cola operates under stable and peaceful conditions in Australia (Department of Foreign Affairs and Trade, 2017).

Complete Free Trade Agreement - A complete fair trade agreement between the US and Australia is one of the comprehensive and historic agreements of trade between the countries that reduces and eliminates the tariff rates and other trade barriers so as to promote growth and prosperity. Coca Cola can have a number of benefits from such agreements in terms of reduced tariffs on exporting materials from the US. In addition, Coca Cola can also export products from the US without any duties.  Coca Cola can utilize the businesses, farmers and consumers of Australia so as to expand the opportunities for the people of the country by increasing the employment rate (USTR, 2004). Australia has a facilitating foreign investment climate and the US has been one of the most important sources of foreign direct investment, Coca Cola being one of them. The complete free trade agreement has been beneficial for Coca Cola in terms of expanding its business in Australia as the country provides full support in terms of dispute resolution along with taking the assistance from Australian businesses regarding the competition law enforcement activities. This treaty has also helped in reducing the probability of conflict between Australia and the US because of the intergovernmental consultations. An absence of conflict between the both countries will help in promoting business between the US and Australia. Under this treaty, Coca Cola will have a number of benefits under a proposed investigation each party will cooperate in the investigation along with the provision of judicial assistance and information. Other agreements between Australia and the US can be beneficial with the help of its well established legal and court systems (US Department of State, 2018). The growth and development of organizations within the economic boundary will help to boost the economic conditions of a nation. This will help in the long run economic growth and development of the country. This is one of the main reasons because of which the countries come in close collaboration by way of agreements and treaties to achieve economic growth and prosperity.

References:

Australian Competition and Consumer Commission. (2009, April 2). ACCC acts on Coca-Cola myth-busting. Retrieved 2018, from Accc.gov.au: https://www.accc.gov.au/media-release/accc-acts-on-coca-cola-myth-busting

Australian Government. (2018). Pricing. Retrieved 2018, from Business.gov.au: https://www.business.gov.au/Products-and-services/Pricing

Australian Government. (2018). Product labelling. Retrieved 2018, from Business.gov.au: https://www.business.gov.au/Products-and-services/Selling-products-and-services/Product-labelling

Blouin, J. L. (2012). Taxation of Multinational Corporations. Foundations and Trend in Accounting, 1-64.

Breen, J., Bergin?Seers, S., Roberts, I., & Sims, R. (2002). The impact of the introduction of the GST on small business in Australia. Asian Review of Accounting, 10(1), 89-104.

Chrysostomos, T. (2015). Free-trade areas and special protection. The Journal of International Trade & Economic Development, 8, 1054-1076 .

Coca-cola Company. (2017). Our Company. Retrieved from Coca-colacompany: https://www.coca-colacompany.com/our-company

Department of Foreign Affairs and Trade. (2017). Australia's free trade agreements (FTAs). Retrieved 2018, from Dfat.gov.au: https://dfat.gov.au/trade/agreements/Pages/trade-agreements.aspx

Gunningham, N. (2011). Enforcing Environmental Regulation. Journal of Environmental Law, 23(2), 169–201.

Kotey, B. (2014). Small business innovation in the hostile environment of Australia's drought stricken rural communities. Australasian Journal of Regional Studies,, 20(2), 325-343.

PwC. (2017). Doing business in Australia | An introductory guide. Retrieved from PricewaterhouseCoopers: https://www.pwc.de/de/internationale-maerkte/assets/doing-business-in-australia.pdf

Selvakumar, A. X., Looter, S. M., & Irudhayaraj, M. (2015). Basic Features, Opportunities and Benefits of GST. International Journal of Advanced Scientific Research & Development, 2(2), 48-53.

The Conversation. (2017, April 3). The government’s company tax cut win a triumph of politics over economics. Retrieved 2018, from Theconversation.com: https://theconversation.com/the-governments-company-tax-cut-win-a-triumph-of-politics-over-economics-75464

US Department of State. (2018). U.S. Relations With Australia. Retrieved 2018, from State.gov: https://www.state.gov/r/pa/ei/bgn/2698.htm

USTR. (2004). U.S. and Australia Complete Free Trade Agreement. Retrieved 2018, from Ustr.gov: https://ustr.gov/about-us/policy-offices/press-office/press-releases/archives/2004/february/us-and-australia-complete-free-trade-agr#

Weatherall, K. (2015). The Australia-US free trade agreement’s impact on Australia’s copyright trade policy. Australian Journal of International Affairs, 69(5), 538-558.