Question:

ESAY QUESTION – 20 MARKS
1. Identify a multinational company operating in Australia. Provide a brief description of the company including the following (5 Marks):
 The industry the company operates in
 Number of staff in Australia
 Number of staff globally
 Location of global headquarters
2. Identify any regulatory framework/s affecting the multinational company you have identified operating in Australia and discuss why and how it affects the company. For example, multinational corporations, like local companies, are subject to 30 per cent corporate tax (5 Marks)
3. Identify any treaties, conventions or agreements that have impacted on the products or services that multinational company provides in Australia. How does it impact the goods/services? (10 Marks)

Answer:

Apple is an American Multinational technology company that was founded by Steve Jobs, Steve Woznaik and Ronald Wayne. The company was incorporated as Apple Computer, Inc. whose head quarter is located in Cupertino, California. The company employs 115,000 full-time employees and maintains 478 retail stores in seventeen countries worldwide. It also operates in Australia and the company develops designs, sells computer software, consumer electronics, and provides online services (Payne 2017). The hardware products of Apple include the iPod portable media player, the iPhone, the Mac personal computer, the iPad tablet, the Apple TV digital media player and the Apple smart watch. The software products of the company include maCOS and the IOS operating systems, the Safari web browser, the iTunes media player and the IWork and the ILife creativity and productivity suites. The online services provide by the company include the iTunes store, Mac App store, IOS App store, iCloud and Apple Music.

The company, being one of the biggest companies in the world, is outgrowing its present head quarters rapidly. Apple has spent years in constructing a complement to its Head quarter at One Loop in Cupertino, California. The new campus is officially known as the Apple Park and is located on the former Hewlett Packard campus. Although the company has been ushering employees but reportedly it is going to take more than six months to shift all the 12,000 employees into the new site (Nwogugu 2015).

The Australian Consumer Law regulates the products and services provided by Apple. According to the ACL framework, the customers are entitled to bring defects related to the services or products of a company either at the time of delivery or after the delivery of the goods. The consumers may make complaints regarding the products within a reasonable period from the date of delivery except the reason for failing to bring the compliant within the reasonable period, is apparent and justifying (Schwalbach et al. 2017). The ACL also stipulates that no additional cost is required to incurred when the consumers complains about any defect in their products. However, the consumers complaining about the defect in their products must contact their respective sellers for the same. While purchasing the product the consumers must contact their sellers to know about the repair or replacement options that are available for the goods. In case, the consumers are purchasing goods overseas they must contact their sellers to know about the available replacement or repair options about their goods.

According to the regulatory framework of ACL, apple provides its customers with a one year limited warranty plan. It entitles its customers to complaint about any defects that may arise out of the products after the goods are delivered to the customers. The customers may complain about the products within one year from the date of purchase of the goods. It does not take any additional cost to repair or replace the products. The customers may contact either the Apple telephone technical support or the Apple Retail Store or the Apple authorized service provider. It also facilitates the consumers to mail-in service in the event of repairing or replacing the products. The overseas customers may contact the sellers to know about the replacement or the repairing options about their products. Moreover, although ACL does not include any guideline regarding technical support services over telephone, the company provides the customers to have access to telephonic technical support.

The Apple Company have entered into an advance pricing agreement (APA) Australia which purports to resolve any uncertainties surrounding the cross-border transactions, arrangements or agreements between the relevant parties to the agreement. The agreement includes double taxation that allows a taxpayer and the tax authorities to address and decide issues related to international transfer pricing (McClure, Lanis and Govendir 2016). The ATO has been working to sort out the cross-border tax structures and profit shifting that is being done by the multinationals like Apple to reduce the amount the companies contribute in higher-taxing countries like Australia. The governments who have been assisting the the multinationals by providing them with special deals, thus, enabling them to pay less taxes lawfully, are now changing their approaches regarding which nation has the right to tax. Apple has entered into APA agreements with the governments worldwide for decades. The APA agreements has permitted the technology giant to lawfully shift its profits to lower tax jurisdictions in order to avoid local tax payments. However, such deals have been called off and the multinational company is bound to make its tax payments (Ting 2014).

The ATO has stated that the tax system in Australia is not in a position to be compared with the tax system of European Union nations, the anti-avoidance laws of the Australian Federal government has been enacted to the defy the erosion of the nation’s tax base. This rational e behind this decision is that the anti-avoidance laws of the state aims at preventing the multinational companies from using artificial arrangements for the purpose of avoiding the acknowledgment of the profits to a permanent business in the country (Lin et al. 2016). The Australian government passed new legislation in order to prevent the multinational companies from shifting their profits in order to avoid payment of corporate taxes.

The international and the national tax system have been attempting to act in pace with the technological developments that have made the global economy highly motivated and enabled by assets and structures that are intangible and highly portable. Since the tax regimes have been developed during a period when most of the tradeable assets were tangible and convenient to locate, various countries have been putting in efforts in their respective tax system in order to account for such assets. The techno giant Apple had to pay $80.3 million in tax where the revenue amounted to only $6 billion, owing to the complicated but legal tax structure, which permitted the techno giant to shift its profits to an Irish subsidiary. The company has stated in its arguments that it acted in full compliance with its local tax obligations. The company argued that despite the adoption of the stringent approach towards the multinationals, the ATO have been granting Apple tax rulings completely in favor of the company.

The company stated that the majority of the company’s revenue is derived from the distribution of the finished goods to Australian consumers and businesses. The company purchases the finished goods from its offshore associates at a higher price.  It results in profits proportionate with the activities carried out by Apple in Australia. The APA agreement with Apple expired and Apple is willing to enter into a further APA with the ATO. The Australian government relies largely on corporate tax as a result of which the reputation of the company is affected. The ATO stated that APA agreements are entered into in the event where the ATO has a positive working relationship with the company on the basis of full disclosure. Apple further argued that it still persists to have an open relationship with ATO and the company continues to act incompliance with the tax obligation of the country (Devereux 2016).

The techno giant argued that since its APA agreement has expired it was willing to renew the agreement. However, the ATO asserted that the APA agreements cannot be moved forward , instead, such agreements must be reviewed on a regular basis in order to ensure that the agreement continues to be appropriate and relevant to the nature of the business that is carried out in Australia (Huesecken and Overesch 2015).

Further, another legal framework that governs the consumer rights in Australia have initiated legal action against Apple Inc on the ground that it used a software update to disable iPhones whose cracked scenes are fixed by the third parties. The Australian Consumer Law (ACL) governs the techno giant operating in Australia. Apple has disabled hundreds of smart phones and tablet services with the software update and then the company refused to unlock the same on the ground that the consumers had their products serviced or repaired by non-Apple repairers (Corones 2016). According to the ACL, the consumer guarantee rights exist independently, irrespective of the warranty provided by the manufacturer, therefore, just because the consumers have repaired their products by a third party, the consumer rights under the ACL shall not be extinguished.

According to the ACL, Apple has been alleged to be engaged in deceptive or misleading conduct and that it had made deceptive or misleading representations to the consumers regarding its software updates and the rights of the customers to get their products repaired by the company (Corones 2013). The Australian Competition and Consumer Commission (ACCC) had brought legal action against the Techno giant on the ground of deceptive and misleading advertisements and was seeking declarations, injunctions, corrective notices, costs and compliance program orders against the multinational company.  Section 18 of the ACCC states that any conduct of any corporation in trade or commerce, which is deceptive or misleading or is likely to be deceptive or misleading is strictly prohibited. According to Section 12 DA of the Australian Securities and Investment Commission Act 2001 also prohibits deceptive or misleading conduct in financial services. These legislations aims at safeguarding the consumers by preventing businesses from misleading the customers and the legal framework is applicable to every situations that is related to or is in the course of trade or commerce in Australia.

The legal framework governing the company in Australia has had an impact upon the goods and services provided by the company. The issues related to the consumer protection framework have affected the goods and services of the company largely. Although the company provides a varied range of products, its customers are not satisfied with the fact that if the products are repaired by non-Apple repairers the company is disabling the products and are refusing to restore the same (Julien 2016). The customers are of the opinion that it is always not feasible for them to have access to Apple repairers to have their products repaired. Under such circumstances, they do not expect the company to disable the service. It would certainly amount to deceptiveness or misleading representation and a breach of the provisions laid down by the ACCC and the ACL in Australia.

Apple stated that it provides employment to thousands of Australian employees and makes payment of millions of dollars every year in corporate and payroll tax. The company further asserts that although it is not in a position to make any comments on the adequacy of the country’s tax framework, it still puts in efforts to re-examine the international tax policies laid down in the multinational forums and frameworks. Additionally, the operation carried out by the company provides thousands of employment opportunities in Australia in areas like logistics, retail and IT, thus, directly supporting the company’s business and endowing the country with an platform for several Australians to market and sell their respective products such as television, music, apps and movies both globally and locally.

The taxation systems must bring about certain changes and cope with the changing nature of the economy. Countries like Australia, are mostly dependant on the foreign direct investment therefore, they must coordinate and cooperate both in the local and global forums. In order to prevent the multinational companies from shifting their profits, the countries must come together and deliberate upon the issue (Richardson et al. 2017). The countries may adopt methods including combined reporting, that would require the multinational firms to report about their profit and loss in each country wherein they carry out their business operations. The countries may adopt consolidation of the OECD profit splitting approach.

It is logical in a global economy that companies would obviously want to form their business in such a manner that they can take advantage of the beneficial rules in various countries. Similarly, every country would want a competitive corporate tax system in order to draw attention and retain the economic activity. However, the tax system of one country must not cause economic damage to the policies of another country. The legal framework of each country must ensure that the operation of the multinational companies are carried on in compliance with the legal framework of the respective countries.

Reference list

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Julien Jr, R., 2016. The cybersecurity aspects of Apple Pay (Doctoral dissertation, Utica College).

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