HI5015 Legal aspects sample assignment Bayer
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BAYER IN AUSTRALIA
HI5015 Legal aspects of business and enterprise
Table of Contents
1. Identify a multinational company operating in Australia. 2
2. Legislative regulatory frameworks affecting the MNC.. 2
3. Treaties, Conventions or Agreements. 4
1. Identify a multinational company operating in Australia
Bayer Australia is an organisation, operating in the basic materials industry. The organisation deals in pharmaceutical, consumer health, crop science and Animal health.
The basic materials industry in Australia, specifically the industrial and agricultural chemical products has experienced a growth of $ 13 billion (Ward, 2017). The industry experienced a growth rate of 5.37% in the Australian market. It is expected that this industry will experience a growth of 20.43% in the year 2018 and a steady growth of 1.56% in the coming years (Mintz, 2009). Considering the Australian scenario, it is observed that the market for basic materials has reached at a maturity stage of its life cycle. The renowned industry players include BHP Billiton, Afterpay, Adelaide Brighton Cement, Alumina Limited, Altium ALS and many more.
The company has employed around 28,000 in Australia and Asia-Pacific region. The organisation has employed a total number of 115,200 employees across the world. Bayer is a German organisation and its head office is located at Leverkusen, Germany (Mathur, 2012).
As an MNC operating in Australia, Bayer is required to follow different regulatory requirements that are applicable for conducting business in Australia. Some of the regulatory requirements have been specified below:
For operating business in Australia, Bayer is required to register itself with Australian Securities and Investment Commission (ASIC). Moreover, Bayer is also required to abide by the requirements of ASIC and amendments made in them from time to time.
The Australian Competition and Consumer Commission in Australia regulate and enforce competition law and ensure that organizations are involved in fair trade practices. As an MNC operating in the Australian market, it is mandatory for Bayer to follow the requirements of Competition and Consumer Act 2010. The Competition and Consumer Act 2010 has been formed to regulate every industry players in the Australian market, in regards to product safety, unfair trade practices, unfair competition, unfair pricing, unfair competition, mergers and amalgamations and industry codes. Being a company operating its business in Australia, bayer is required to follow the requirements of this Act (Tomasic, Bottomley and McQueen, 2002).
As Bayer deals with customers in Australia, the organisation is also required to follow the requirements of Australian Consumer law. The Australian Consumer law is applicable at every territory in Australia and every organisation. The Australian Consumer law focuses upon provision of guarantees to consumer rights in regards to purchase of goods and services, product safety, controlling of unsolicited customer agreements, governing lay-by agreements, redressing consumer grievances. Hence, Bayer is required to follow the requirements of the Australian Consumer Law (Malbon and Nottage, 2013).
For every organisation, selling products to customers in Australia, it is mandatory for such organisation to adhere to the requirements concerning product safety as mentioned in the Australian Consumer law. If an organisation is a supplier or a manufacturer, there is a legal obligation for such organisation to adhere to the Australian Safety Standards and such organisation will only be able to market products which are safe. Hence, it will be manadatory for organizations manufacturing or supplying products to provide clear and understandable instructions regarding the usage of such product and there must be warnings proviced to the customers regarding the consequences of misuse of the product, this will help the organisation in ensuring that the same has complied with the required safety standards. As bayer is a manufacturer and sells its products in Australia, the organisation is required to abide the product safety standards, applicable in Australia (Gibson and Kelsen, 1993).
Bayer is involved in producing pharmaceutical, consumer health, crop science and Animal health products, which can affect the environment. Therefore, the environmental law in Australia such as, Environment Protection and Biodiversity Conservation Act will be effective upon the company. It will be mandatory for the organisation to follow the provisions of the law to protect the environment. The organsiation would also be required to acquire approval from Department of Environment and Energy and at the same time , the company will also have to acquire license from the local and state governments, where it operates its manufacturing process.
Bayer is required to pay tax and follow the taxation rules operative in Australia, as the organisation conducts its business in Australia. As per the taxation rule sof Australia, an organsiaiton is required to pay corporate tax at the rate of 305 upon its taxable income. Hence, Bayer will also be required to pay tax at the rate of 305 upon its taxable income. Being a business entity, the organisation can purchase and sale capital assets and therefore, it can incur gains by selling capital assets. In that case, the organisation will be liable to pay capital gains tax in Australia. In case of purchase and sale of capital assets in Australia, Bayer will be obliged to pay capital gains tax at the rate of 30% upon the net capital gains generated by the organisation. The Australian business are also subject to payment of Goods and Service Tax (GST), which is paid as a value added tax, at the rate of 10% on almost every goods and services sold in Australia (Prince, 2016). However, there are certain exemptions provided on goods such as, healthcare, housing items and certain types of foods, as well as concessions allowed in certain cases. Being an MNC operating in Australia, Bayer is required to pay GST, however, Bayer also deals in producing healthcare products and hence, the company may get certain exemptions. The organisation will also be subject to payment of Payroll tax in Australia. Every business operating in Australia that pays wages to its employees, will be obliged to pay payroll tax upon the total amount of wages paid to the employees, if such amount exceeds the threshold amount as mentioned by the rule of the state or territory, where the business operates. Hence, Bayer will also required to comply with the rules concerning payment of payroll tax (Prince, 2016).
The organisation will also be required to comply with the requirements of the employment laws effective in Australia, as it employs workers to run its business in Australia. Therefore, bayer is required to comply with the provisions of National Employment Standards, Work Health and Safety Act 2011, Minimum Wages Act, Fair Work Act 2009 and also to avoid any form of discrimination in the workplace (Cameron, Tucker and Hammer, 2011).
For conducting its operations in Australia, Bayer is required to file its financial statements with ASIC. The company is listed in the Australian Securities Exchange and hence, Bayer will be obliged to file its annual returns with the ASIC. The financial statements prepared by the company must be made by following Australian Accounting Standards.
The products and services provided by an organisation can directly or indirectly be affected by any treaty, agreement or conventions formed between the country of origin with any other nations. The various treaties, agreements and conventions that have affected the products offered by Bayer are stated below:
Australia-European Union Free Trade Agreement:
EU as a block can be considered as one of the largest markets of the world. European Union can be regarded as the second largest trading partner of Australia and EU can also be considered as third largest trading destination for Australia, it is in the second largest position from the perspective of service market and the largest source that Australia have to acquire foreign investment. Both European Union and Australia can be considered as natural partners and both the nations have shared commitments towards norms, law as well as open markets. As a result of that, Australia and EU have initiated negotiations to form a free trade agreement (Mascitelli and Wilson, 2018). This Agreement will help in forming a robust bilateral relationship between Australia and EU. Although there has been bilateral agreement formed between Australia and EU in 2017, named as, Australia-EU Framework Agreement, the formation of the new agreement will make cooperation stronger. There will be higher levels of trade, exchange of people and goods between the two nations. Bayer is a German company. Germany being a member of EU, the goods offered by Bayer in Australia can be affected by the formation of this FTA in a positive manner. The duties on imports made by Bayer will be reduced and the same will help in reducing considerable cost of acquiring raw materials. The benefit will be reflected upon the low prices of the products set by the organisation, which will provide Bayer a competitive strength and enhance profitability.
Tax treaty between Germany and Australia:
The formation of Tax treaty between Germany and Australia has also affected the products offered by Bayer. It is a treaty formed to avoid double taxation, the treaty came into force on 7th December 2016. The formation of this treaty will help Bayer to reduce its tax liability. MNCs operating in two different countries are required to pay taxes on the taxable income as per the tax laws of both nations. Double taxation agreements are formed so that the tax is collected in the country where the income has been generated. The formation of the double taxation agreement between Germany and Australia, will affect the products of the Bayer, as the company’s tax expenditure will be lowered. This will help in reinvesting the additional fund, which would otherwise have been paid as tax; this will lower the market price of the products and enhance the demand for the products of the company (McMenamin, 2009).
Australia has Free Trade Agreements with numerous nations, such as, Chile, China, Japan, Korea, Malaysia, New Zealand, Singapore, Thailand, USA, ASEAN-Australia New Zealand agreement. Forming free trade agreement with all those nations, will lead Australian companies to freely export their products in the markets of these nations and business in Australia will be relieved of import duties and tariffs to be paid for importing products and raw materials from these nations. Therefore, these Free trade Agreements will affect the products of Bayer in a favourable way. Bayer will be able to source raw materials from these nations at a lower cost and the same will enhance productivity and quality of the products of the company. Moreover, lower cost of acquiring raw materials will lower the prices of the products as well as enhance the profitability of Bayer (Stoyanov, 2014).
European Union- Australia Framework Agreement:
The Framework Agreement was signed by the high representatives of European Union and the Foreign minister of Australia. The agreement was signed in the year 2017. The formation of this agreement has initiated a new dimension of strategic cooperation between the European Union and Australia. The sole objective of forming this agreement was to enhance the ability of both European Union and Australia to handle matters concerning challenges in foreign and security policy, issues concerning climate change, encouraging sustainable development as well as matters concerning economy and trade (Suder, 2018). The objective of forming this agreement was to encourage and guide more stronger engagements between European Union and Australia in future and to initiate negotiations concerning the formation of an effective free trade agreement (Suder, 2018). The formation of this agreement has also affected the products of the company, as Germany is a member of EU and Bayer is a German organisation, Bayer will be able to import raw materials for production from any of the EU member states and will get relief on paying import duties and tariffs. This will enhance the availability of quality raw materials for production at a lower cost and the same will help Bayer in enhancing product quality and reducing prices.
the above treaties and agreements and having regard to their nature, it can be
said that the agreements and treaties formed by Australia with different
nations, including EU and Germany will help MNCs like Bayer, operating in
Australia to get full advantage of enhanced lowered trade barriers and low tax
expenditure. The benefits will directly reflect upon their competitiveness,
product quality and profitability.
Cameron, M., Tucker, L. and Hammer, C. (2011). Employment and the law. Sydney: Legal Information Access Centre.
Gibson, A. and Kelsen, I. (1993). Essentials of Australian business law. Melbourne: Longman Cheshire.
Malbon, J. and Nottage, L. (2013). Consumer law & policy in Australia & New Zealand. Annandale, N.S.W.: Federation Press.
Mascitelli, B. and Wilson, B. (2018). Against the odds—a free trade agreement between the European Union and Australia?. Asia Europe Journal.
Mathur, C. (2012). Compulsory Licensing: A Study with Reference to India’s First Pharmaceutical Compulsory License Case of Natco vs. Bayer. SSRN Electronic Journal.
McMenamin, I. (2009). Ideology, Institutions and Strategy in Party-Firm Relations: Quantitative Studies of Australia, Canada and Germany. SSRN Electronic Journal.
Mintz, C. (2009). Financial Crisis Reshaping the Life Sciences Industry. Science.
Prince, J. (2016). Tax for australians for dummies. Hoboken, N.J.: John Wiley & Sons.
Stoyanov, A. (2014). Endogenous Free Trade Agreements and Foreign Lobbying. Review of International Economics, 22(3), pp.561-577.
Suder, G. (2018). The business case for a free trade agreement between the European Union and Australia. Australian Journal of International Affairs, 72(3), pp.272-286.
Tomasic, R., Bottomley, S. and McQueen, R. (2002). Corporations law in Australia. Leichhardt, NSW: Federation Press.
Ward, K. (2017). A Look At Papyrus Australia Limited (ASX:PPY) And The Basic Materials Sector. [online] Simply Wall St. Available at: https://simplywall.st/news/a-look-at-papyrus-australia-limited-asxppy-and-the-basic-materials-sector/ [Accessed 21 Aug. 2018].