Discuss about the General Motors for Automobile Industry.
General Motors is an American multinational company that operates in the automobile industry. Over the years, the company has expanded to global locations, and this has seen the firm grow both in profitability and market share. The company’s leading brands include Vauxhall Chevrolet, Wuling, Buick, Cadillac, Opel, Holden, Baojun and Jiefang. General Motors prides itself with the diversity among its workforce and this is seen in its outlets around the world. In Australia the company has the Holden location which has over 2900 employees (Holden, 2016). Globally, General Motors has over 215,000 employees who help the company foster its operation in six continents. The global headquarters for the company is in Detroit, Michigan USA (General Motor, 2016).
According to the Foreign Investment Review Board (2016), the Australia government encourages more multinational companies to operate in the country through sound regulation and policy. The government realizes that multinational firms that operate in Australia create jobs, bring with the innovative technology and foster competition among other local firms (Guzman, 2013). Although investment by multinational corporations is encouraged, it is up to the firms to ensure that they are in compliance with the regulations so that they can conduct their businesses without any disruptions. The following regulations and policies affect the operations of General Motors in Australia.
Multinational corporations in Australia are synchronized by the Foreign Investment Review Board. Firstly, before General Motors was allowed to conducted business in Australia, it had to undergo various checks. The first part of the legal requirements was to provide a cover letter detailing the total investment made by General Motors. Moreover, the cover letter has to show the name of the parent company, its subsidiary locations in Australia as well as their addresses. The economic interest of the company in Australia had to be also stated as well as its overall ownership and control (Conley 2014, p.263).
Secondly, the other policy that affects the operations of General Motors is the protections on national interests. The Australian government has to ensure that any multinational company that operates in the country does not compromise the community interests where it operates (Yu Chang and Thorson, 2010). If a firm is found to be violating national interests, then its license to operate in Australia is immediately terminated. The national interest test also provides wider benefits as it provides the government with flexibility on how it can think about strategic foreign investments (Conley 2014, p.263). General Motors has not violated any national interests since its operations in Australia have not caused any security concerns.
Additionally, competition policies in Australia also affect the operations of General Motors. Competition in Australia is regulated through the competition policy that serves to protect consumers and other competitors from any uncompetitive practices. Australia’s substantive competition laws are outlined in Part IV of the Trade Practices Act 1974. This Act outlaws any anticompetitive contracts, price-fixing cartels, anticompetitive mergers and acquisitions as well as secondary boycotts that affect competition (Guzman 2011, p.163; Hope 2002, p.99). One of the aims of the competition policy is to ensure that the economy does not have many monopolies that, and to also ensure that the entry of multinational companies is smooth (Medalla, 2015, p.9).
Globally, multinational corporations are known for tax avoidance, but in 2015, the federal government of Australia introduced measures that were aimed at combating the increase in tax avoidance by the firms.Currently, multinational firms like local firms pay a 30 percent corporation tax on their revenues to the federal government (Australian Tax Office, 2016). However, multinational firms such as General Motors are notorious for avoiding tax hence the measures that were put in place by the government to cub this trend. The new regulation applies to General Motors because its annual global turnover in over $1 billion hence the company has to pay the 30 percent corporation tax (PwC Australia, 2015).
According to Bath (2015) the other policy that affects multinational firm operations in Australia is the behaviour of the foreign investor. The federal government uses this policy to check whether a firm is connected or in control by a foreign govern. This policy applies to the General Motors because the Australian government has to ensure that the firm is not under any influence from the U.S government in the course of its operations. Moreover, the federal government of Australia also explores the extent to which the U.S might exercise influence through the operations of General Motors.
The United States and Australia have a free-trade agreement that fosters smooth movement of goods as well as services between the two countries. According the U.S Office of the Trade Representative (2014) the treaty between the U.S and the Australian government facilitates duty-free movement of goods as well as services between the two countries. The immediate industries that benefited from this agreement included automobile, fabricated material and electrical appliances. This treaty impacts of the products of General Motors because it operates in the automobile industry which was of the beneficiaries from the treaty. Additionally, the treaty provides a mechanism for solving any disputes that arise in the course of conducting international trade.
The convention concerning the Australian government as well as the United States government for the avoidance of double taxation and the prevention of Fiscal Elusion with respect to Taxes on income was put in place in 1982. Moreover, the convention was also amended after some years by a protocol that was reached in 2001 (Australian Government, 2016). Firstly, the protocol puts in place a preparation to an enterprise to ascertain all the benefits are earned via the sustainable plan that involves an entity which is acceptable. That it can undergo taxation where the permanent institution is located. Moreover, the Restriction on benefits article pursues to stop people who belong to associated states of employing interjected firms (IRS, 2016).
According to this policy, within United States, a strategy discards acknowledgement that piles up the tax earnings as well as private keeping organization revenue like the union monetary gain tax that cannot be included along with the rule. However, for Australian side, the pattern again discards undiversified taxed earnings while ensuring that the particular mentions pertaining Australian taxation on money generation as well as crude resourcefulness lease taxation are included. Furthermore, the protocol goes ahead to amend the articles that are related to shipping as well as air transport. The protocol amends this article by widening the situations whereas undivided abidance nation taxes shall hold of a bleak boat rent of ships as well as aircrafts that are employed in the global dealings as well as utilization of sustenance instrumentations also utilized in multinational dealings (Australian Government, 2016).
According to Australian Government (2016), the convention between America and Australia gives a variety of elisions towards common restriction of fifteen percent towards the mother nation taxes about the incentives. Thence, there is no taxation that can be levied from mother nation upon the incentives that the donee dignified firm occupant within another nation owns more than 80 percent voting ability from a firm compensating the incentives as well as satisfying particular condition that include the public necessities that are contained in the article of limitations of the benefits (Farrar & Hiscock, 2015).
Additionally, the interest upon parent nation taxes in stake beneath the policy stands at around ten percent. Thence, it is important to note that no taxation is applicable in the source nation on the interest that results from a government department of the partner country or even a financial institution resident in the other state. Royalties are also affected positively in the convention that is a boundary on parent nation taxes from the payment gets minimized. Charges for utilizing industrial, commercial as well as scientific equipment are also discarded and they are no longer associated with royalties. All these factors are for the purposes of the convention (Australian Taxation Office, 2016).
General Motors as a multinational company that operates globally has been impacted by various conventions. Firstly, it is a beneficiary of all the investments as well as the service obligations that are stipulated. Consequently, this has led the multinational to increase investment flows to both countries further intensifying competition among other companies that operate in the same market. However, the tax treaty has also influenced the firm’s trade decisions. The introduction of the convention has influenced the firm to alter its trade behavior particularly by operating in ways that ensure that profits are lowered in the host country.
References
Australian Government, A. (2016). Australia and the United States treaty: key points. [online] Ato.gov.au. Available at: https://www.ato.gov.au/General/International-tax-agreements/In-detail/Tax-treaties/Australia-and-the-United-States-treaty—key-points/ [Accessed 9 Aug. 2016].
Australian Taxation Office, (2016). Combating multinational tax avoidance – a targeted anti-avoidance law | Australian Taxation Office. [online] Ato.gov.au. Available at: https://www.ato.gov.au/Business/International-tax-for-business/In-detail/Doing-business-in-Australia/Combating-multinational-tax-avoidance—a-targeted-anti-avoidance-law/ [Accessed 9 Aug. 2016].
Bath, V. (2015). The National Interest and Australian and Chinese Investment Law and Policy. Farrar, J. & Hiscock, M. (2015), Australia’s Trade, Investment and Security in the Asian Century Editors, 1st ed. Singapore: World Scientific.
Conley, T. (2014). The vulnerable country: Australia and the Global Economy. [Sydney]: Read How You Want.
Foreign Investment Review Board, (2016). Australian Foreign Investment Policy. 1st ed. [ebook] Available at: https://firb.gov.au/files/2015/09/Australias-Foreign-Investment-Policy-2016-2017.pdf [Accessed 9 Aug. 2016].
General Motors (2016). About General Motors | GM.com. [online] Available at: https://www.gm.com/company/about-gm.html [Accessed 9 Aug. 2016].
Guzman, A. (2013). Cooperation, comity, and competition policy. Oxford: Oxford University Press.
Holden, (2016). Holden’s Australian Future. [online] Holden.com.au. Available at: https://www.holden.com.au/about/our-company/our-future [Accessed 9 Aug. 2016].
Hope, E. (2016). Competition Policy Analysis. London: Routledge.
IRS, I. (2016). Australia – Tax Treaty Documents. [online] Irs.gov. Available at: https://www.irs.gov/businesses/international-businesses/australia-tax-treaty-documents [Accessed 9 Aug. 2016].
Medalla, E. (2015). Competition policy in East Asia. New York [u.a.]: Routledge.
PwC, (2015). Large and multinational businesses. [online] PwC. Available at: https://www.pwc.com.au/federal-budget-2015/multinational.html [Accessed 9 Aug. 2016].
U.S Office of the Trade Representative, (2014). Summary of the U.S.-Australia Free Trade Agreement. [online] Ustr.gov. Available at: https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/archives/2004/february/summary-us-australia-free-trade-agreement [Accessed 9 Aug. 2016].
Yu Chang, A. and Thorson, A. (2013). A legal guide to doing business in the Asia-Pacific. Chicago: American Bar Association, Section of International Law.
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