Legal Aspects of ITE Group Report cover sheet

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Requirement

1- Write a repot on "Legal Aspects of ITE Group Report cover sheet" with references to APA in 2000 words .

Solution

Introduction

This report would cover the research of Nestle (an MNC) that is based in Switzerland but having a presence in Australia(Nestle.com 2019). A brief introduction of the company would be given for familiarization of the chosen business. The aim of the research is to identify the applicable legislation as well as the regulatory frameworks that affect the operation of the MNC in Australia. There would be further analysis of the treaties, conventions or agreements that would have an effect on the operation of the company(Nestle.com 2019).

Company description

The history of Nestle dates back to 1866 when it was initially founded as the ‘Anglo Swiss Condensed Milk Company’. In 1867, Henri Nestle came up with a break-through food for infants and in 1905 his company merged with Anglo-Swiss thereby forming the Nestle Group(Nestle.com 2019).
Nestle is a trans-nation company that deals with food and drinks. They are headquartered in Vevey (Vaud), Switzerland. In 2018, it was the top FMCG (Fast Moving Consumer Goods) company of the world. The company deals with more than 2000 brands(Nestle.com, 2019).
In Australia, there are around 5578 employees working in Nestle (known as Nestle Oceania). There are 13 factories and 5 distribution centres. Also, there are almost 20 offices spread across New Zealand, Australia and the Pacific Islands(MBA Skool-Study.Learn.Share., 2019).It is estimated that in 2018, Nestle was having almost 3,08,000 people employed with the company worldwide.
The global headquarters of Nestle are spread across 5 destinations namely – Africa, America, Asia, Europe and Oceania(Nestle.com 2019).

Legislative and regulatory frameworks affecting MNC FMCG in Australia

Understanding Australian business regulation

The state as well as the territory legislations have been formulated to ensure that the consumers are protected. Apart from the consumers, the government is also very serious about its community and the environment and want that all companies including MNC FMCGs (like Nestle) to follow the fair trade and competition practices as laid down by the ACCC (Australian Competition and Consumer Commission).
The ACCC decides how the various businesses are supposed to interact with the buyers, vendors as well as other businesses. In fact, the commission has laid down the laws and the rights that would be in force in case of any conflict between the consumers and the business operators (Austrade.gov.au, 2019). 

The regulations or the legislation that governs business or trade related activities in Australia are as follows:

  1. Competition Laws: Apart from the provisions laid down by the ACCC, the state as well as the territory law looks after consumer protection in Australia (Siedel and Haapio2016). In fact, there is a fair trade office in every territory or state that provides advice and information on the obligations and the business rights to both the consumers as well as trade operators.

  2. Regulations governing product liability: There is a national statutory framework in place for the regulation of the safety and the standard of the products or goods being sold in Australia(Commodity.com, 2019). Therefore, Nestle will need to get its entire supply of exports to Australia sufficiently verified by the trade offices to ensure that no harmful product is being marketed or sold in Australia (Muldoon Jr2018).

  3. Environmental Legislations: The local, state or territory as well as the central government of Australia jointly monitor the protection of the environment. Nestle would be obliged to follow the approval process to ensure that they are compliant with the national environment and culture norms. The company needs to be aware that depending on the specific business activity, the legislation of the concerned state, as well as territory environment protection, would apply (Koskenniemi2017).

  4. Privacy laws: OAIC (Office of the Australian Information Commissioner) oversees all aspects of the national privacy legislation. They decide how businesses operating in Australia are supposed to access, collect, record personal information, medical details and so on. The legislation covers various sorts of activities across different sectors(Developed-markets-research.hktdc.com 2019).

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Running a business in Australia

The Government of Australian provides information as well as support so that business operating in Australia especially the MNCs can start operations and continue with the business. This involves guidance to the businesses on how to recruit people, pay taxes to the government and fulfil other regulatory obligations as applicable especially financial reporting (Katznelson and Shefter2018).

Employing Australians

The employment regulations in Australia are quite flexible(Department of Foreign Affairs and Trade 2019). Businesses and MNCs that are looking to employ Australians are required to comply with a range of legislative formalities as given below:

The two prime organizations namely – FWA (Fair Work Australia) and FWO (Fair Work Ombudsman) have set down a set of standard employment norms that cover all important aspects related to employment like safety provisions, workplace health, pension and many more (Howells, Micklitz and Wilhelmsson 2016).
It is possible for MNCs like Nestle to hire people in Australia in primarily two different ways. One as an employee and the other in the form of contract workers. Each of these comes with various levels of flexibility and stability. The impact on the employer as well as the employee will depend on the work agreement and the facilities that might be applicable (Nestle.com 2019). Overall, all employees in Australia are entitled to the provisions of the national employment standard that cover aspects like working time, provisions for flexible working, leave policy, discharge pay and termination (Eicher 2016). Multi-nationals like Nestle are required to furnish a safe work place and must cover the requirements pertaining to occupational health and safety. The provisions must cover work place incidences as well.

Australian Taxes

The ATO (Australian Tax Office) is responsible for the collection of majority of the business taxes. In a few cases, the state applied taxes might also apply in the form of the payroll tax. Australia has also negotiated with quite a few countries (more than 40) to avoid double taxation of foreign business houses operating in Australia. A tax treaty exists between Australia and Switzerland and hence it applies for Nestle too.

Business tax

Non-resident Australian companies like the MNCs are subjected to the same taxation rules and laws as the residential ones. However, there might be slight variation depending on factors like the industry a business belongs to or the structure of the business (Nestle.com 2019). For the financial year 2018-19, the applicable tax rate for MNCs like Nestle would be 27.5 per cent if the aggregated turn-over is less than 25 million dollars for the year 2017-18. If the aggregated turnover is more, then the applicable tax rate will be 30 per cent. In 2017, Nestle Australia Ltd. dad generate a turnover of 2,220,849,000 dollars. Thus, the tax liability would be calculated as per 30%.

Financial reporting

In Australia, all business entitles including MNCs are required to submit the financial report that must be prepared as per the specified legislative requirements (De Visscher 2015). The businesses (whether domestic or foreign/multinational) are required to submit their financial details to:

  • ATO (Australian Tax Office).

  • ASIC (Australian Securities and Investment Commissions).

  • ASX (Australian Securities Exchange).

The government of Australia has also facilitated the submission of BAS (Business Activity Statement) to the taxation office regarding payments and tax reporting. It can be submitted electronically or through mail or submitted manually (Brewsteret al. 2016).

Treaties, conventions or agreements

Both Australia and Switzerland enjoy a relation which is highly dynamic. This is because the relationship is based on bilateral economic and political interest. This has been made possible by both the nations through high level dialogue. It is worth mentioning that Switzerland has already made significant investment in Australia already and this contemporary bond between the two nations can be quite beneficial for Nestle (Nestle.com 2019). It is also an advantage that the cultural and traditional links have also brought the two nations quite close. There is an expanding tie-up in sectors like two-way investments, education and research and development.
Back in 2013, the foreign minister of Switzerland had signed a MoU (Memorandum of Understanding) with the Australian government in order to strengthen the bilateral ties. The Australians too, meet up with their Swiss counterparts regularly which is good especially for a company like Nestle that has made huge investments in Australia (Bettig2018).
Both the nations have entered into many bilateral agreements regarding double taxation, social security, air service, extradition, mutual law enforcement and nuclear projects. That apart, the two nations have also agreed for co-operation on aspects like science, innovation, various types of training and health. This is an indication that only will it help Nestle to sustain their business in Australia but there is scope for enhanced business in the future as well (Amani 2016). In 2015, both countries signed a deal so that co-operation could be extended to control the evasion of tax.

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Bilateral trade and investment

The bilateral investment relationship of the two nations is considered the prime source of prosperity for both. The economic relationship of both is growing on a continuous basis. In 2015, the merchandise import of Australia (from Swiss) stood at 3.3 billion dollars. The import included items such as watches and clocks, medical supply and other miscellaneous items (Nestle.com 2019). Surely, this must have benefitted Nestle and it is expected that the same will continue in the days ahead.
Switzerland also happens to be the 10th largest FDI (Foreign Direct Investment) for Australia. In 2015, the investment done was worth close to 50.2 billion. Apart from Nestle, there are other companies as well who operate in Australia belonging to sectors like pharmaceutical and finance (Nestle.com 2019). This is a good sign for Nestle since this indicates that things are on the rise especially in termsof business.
It should be noted that Australia is considered to be the second wealthiest nation in the world. This is based on the average worth of wealth of an Australian adult. Only Switzerland is ranked above Australia (Nestle.com 2019). Therefore, there lies a huge potential for the development of business in Australia especially with respect to the product range that Nestle has got.
As per figures provided by the OEC / IMF in 2016, among the top 5 commodities imported by Australia, Coffee happens to be one of those. In fact, Nestle being a world-famous brand of coffee is sure to generate good business from this (Nestle.com 2019).

Foreign Direct Investment (FDI) Policy

Australia maintains an open approach when it comes to foreign direct investment. The country considers that to be the main contributor for productivity and economic growth. The most favourable aspect of the Australian rules and regulation is both domestic as well as foreign business setups are allowed to establish their business on the Australian soil. A free hand is given to investors so that they are able to roll out almost any and every form of remunerative initiative. The only thing is they need to be within the regulatory and the legislative norms of the country.
Another favourable factor for foreign direct investors is the legal, accounting and the regulatory practices have been designed in a way so that there is maximum transparency and the formalities are in accordance with the international standard.
The areas that require the approval of the government areinvestment in trusts, corporations or acquisitions of Australian businesses that are having a gross asset value of more than 252 million dollars (Nestle.com 2019).

R & D Tax incentive

In 2018, businesses that were having turnover below 20 million dollars have been given R & D tax credit of 43.5 per cent (Nestle.com 2019). For up to 20 million dollars, the incentive will be 38.5 per cent and 30 per cent in case the expenditure is up to 100 million. There are provisions for certain grants as well for specific R & D programs. Such grants are discretionary.

ESIC (Early Stage Innovation Company) Tax incentive

The Australian government strongly encourages risk taking, innovation and entrepreneurship. This early stage incentive is directed at connecting investors with ESICs.

Other Incentives

The government of Australia extends other incentives as well based on various factors like which sector and accordingly financial assistance or concessions in land rentals are extended (Nestle.com 2019).

Conclusion

It can be concluded that Australia has an open approach for companies that are looking to start a business. The government is very serious about the consumers and so has come up with clearly defined policies to protect their interest. For this, the county is having trade fair offices all around the country to assist both consumers as well as business operators. The government is also conscious of the environment as well as Australians employed with the MNCs and accordingly have formulated policies so that both are safe-guarded. The treaties, conventions and the agreements between the two nations suggest that both are aiming for mutual growth. Hence, for Nestle a lot of scope existsfor expanding its business interest in Australia.

Reference

  • Amani, B., 2016. State agency and the patenting of life in international law: merchants and missionaries in a global society. Routledge.

  • Austrade.gov.au. 2019. Understanding Australian business regulation - Austrade. [online] Available at: https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation [Accessed 1 May 2019].

  • Bettig, R.V., 2018. Copyrighting culture: The political economy of intellectual property. Routledge.

  • Brewster, C., Vernon, G., Sparrow, P. and Houldsworth, E., 2016. International human resource management. Kogan Page Publishers.

  • De Visscher, C., 2015. Theory and reality in public international law. Princeton University Press.

  • Eicher, S. ed., 2016. Corruption in international business: The challenge of cultural and legal diversity. CRC Press.

  • Howells, G., Micklitz, H.W. and Wilhelmsson, T., 2016. European fair trading law: The unfair commercial practices directive. Routledge.

  • Katznelson, I. and Shefter, M. eds., 2018. Shaped by war and trade: International influences on American political development (Vol. 79). Princeton University Press.

  • Kirton, J.J. and Maclaren, V.W., 2018. Linking Trade, Environment, and Social Cohesion: NAFTA Experiences, Global Challenges. Routledge.

  • Koskenniemi, M., 2017. Sources of international law. Routledge.

  • MBA Skool-Study.Learn.Share. 2019. Top 10 FMCG Companies in the World 2018 | Best Consumer Goods Brands | MBA Skool-Study.Learn.Share.. [online] Available at: https://www.mbaskool.com/fun-corner/top-brand-lists/17609-top-10-fmcg-companies-in-the-world-2018.html [Accessed 1 May 2019].

  • Muldoon Jr, J.P., 2018. The architecture of global governance: an introduction to the study of international organizations. Routledge.

  • Nestle.com. 2019. [online] Available at: https://www.nestle.com/aboutus/history/nestle-company-history [Accessed 1 May 2019].

  • Siedel, G. and Haapio, H., 2016. Proactive law for managers: a hidden source of competitive advantage. Routledge.

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