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HI5015 Sample Toyota Motors

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HI5015 Legal Aspects of International Business and Enterprise

Table of Contents

Section 1. 3

Brief description. 3

Section 2. 3

The legislative and regulatory framework. 3

Section 3. 6

Treaties, Conventions, and agreements. 6

References. 9

Section 1 Brief description

Toyota Motor Corporation is a multinational automobile Company headquartered in Japan. Toyota is considered as one of the leading manufacturers of car and also given some best models car. The company also ranked under largest manufacturers of automobiles. The company is currently working with more than 350000 employees all around the globe having 2747 employees in Australia. The company is a manufacturer of cars and trucks. The company produced more than 10 million vehicles since the year 2012 and broke the world record.  The company also stood fifth and largest in earning revenue in the year 2017 (Toyota, 2017). Toyota is working worldwide and having 51 overseas manufacturing Companies including 28 countries and regions respectively. Company vehicles are sold in different regions which includes more than 170 countries. The company has an office in Beijing, China, Los Angeles, US, Canada, Brazil, Argentina, Mexico, Venezuela, France, U.K., Russia, Poland, Turkey, Kenya, India, Egypt, Indonesia, Malaysia, Pakistan, Thailand, Vietnam, Australia, Bangladesh and Taiwan.

Section 2 The legislative and regulatory framework

            Australia automobile industry is a most advanced industry in Australia but the Multinational Companies in Australia has an uncertain future. A constraint and complex policies of export is another challenge. Below are provided some legislative and regulatory framework and its impact on the Toyota as a multinational automobile Company in Australia.

Resident Companies in Australia are liable to tax rate as prescribed by the Australian Government. They have to pay tax on the income earned from anywhere in the world except if there is any treaty or any other agreement between Australia and any other country. Furthermore, in the case of a multinational Company or non-resident Company is taxed at the same rate as there on resident Companies. But the taxable income may fluctuate depending on the nature, type, and structure of the business (Salacuse, 2010). The rate of tax is 30% which is 27.5% in the case of small businesses. Toyota is liable to pay tax as per the normal provision of the income tax applicable on the local or resident Companies in Australia. The company is also required to pay Goods and service tax on goods and services sold in Australia. For capital gain tax, Toyota will be eligible for capital gain tax on the assets which has been acquired and carried in Australia.

            Australia has also established controlled foreign Companies regime under which the non-active income of the foreign companies controlled by a resident of Australia will be attributed to the residents after differentiating between listed countries and other unlisted countries. Listed countries include Japan, New Zealand, German, France, the United Kingdom and unlisted countries are other than above countries. If controlled foreign Company belongs to or a resident in a listed country then range of income tainted will attributed disrespect of the failure of the CFC.

            There are some related party transactions which are also taxable as per the Corporation act, 2001 and Taxation laws of Australia. Toyota will be required to disclose the related party transaction of more than $2 million under its income tax return. For considering the board meeting of Toyota the Company will be treated as a normal local Company as per Australia Tax office. The Company is not allowed to conduct its board meeting on conferences or via the use of the telephone (Dunning, 2013). The directors of Toyota in Australia must involve actively in the strategic decision of the business. Directors of the Company must be highly qualified to take any decision or must be experienced enough for handling a particular task. Members of the board of Toyota must meet in person and must include each director, especially who are living in Australia. The minutes must give the complete information about the discussion with a proof that the meeting actually took place.

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            There are many provisions under law or act which is made specifically for Multinational Companies such as general tort law. Multinational Company such as Toyota can be liable under ordinary tort for any activity conducted overseas including any other common law countries. There are many human right treaties entered between the Countries in order to promote and protect the rights of human and any abuse (Bocken, et. al., 2014). The UN committee was specifically formed for the purpose of saving and protecting the economic, social and cultural rights and also to monitor the international covenant on rights whether social, cultural or economical.

Tax law amendment act was established in the year 2015 by parliament which is also called as combating multinational tax avoidance, 2015. The bill aimed to prevent avoidance of tax and shifting of profit by large multinational corporations. This led Toyota to face the complexities in legal procedure and enhanced legal reporting (Dunning, 2013). More disclosures were attached to this act which was a big challenge for Company to manage and comply. This includes lodging of general purpose financial statements with the start of July month, 2016. The act will apply to the situation when Toyota will generate revenue from a customer of Australia and falling into the jurisdiction where Australia has a treaty.

Several initial guidelines were also issued by Australian Tax Office providing a high level of the roadmap in ruling multinational Companies. This includes standard documents for transfer pricing, agreements which have been entered for avoiding the presence of taxation in Australia. Further, the activities of any Australia associated entity should not support in sales or profit for booking into the overseas and also not attributable to the permanent establishment. If Toyota found to be doing so then there will be the imposition of a penalty of 40% as diverted profits tax done through related party transactions or arrangements. Penalties will be doubled if any false or misleading statement has been submitted by the Toyota.

The automobile industry is under an extreme pressure in terms of imports and a large declined is also faced by Toyota in market share. The CIM in Australia provides concession on imports of certain raw materials, chemicals, plastics and paper products. Further, there are still many restrictions on manufacturing in Australia by multinational Companies. One of the schemes named automotive competitiveness and investment scheme was addressed in the year 2001 which planned for five years by the board (Salacuse, 2010). Further, the extension was also made for 5 more years. After that, a new car plan for a greener future was also introduced in the year 2008 which aimed to give transitional assistance to the automobile manufacturers industry to enhance the openness of the market. The scheme was developed via import credit linked investment level and research and development. The goal of the scheme was mainly to deliver more overseas market access and to facilitate more exports which lead to positive impact on Toyota to increase its sales locally and globally. The Australian government was also providing funding to Toyota via GCIF with the aim of introducing Hybrid Camry.

Section 3 Treaties, Conventions, and agreements

The free trade agreement was signed by Australia with Japan which created huge opportunities for Japan. There was a reduction in the tariff barriers and quotas. This increased the chance of Toyota to reach to new people, new markets and import any materials from Japan with low tariff rates (Lester, et. al., 2016). But there was not much encouragement to trade legislation with this agreement. Australia is also negotiating free trade agreements with India, China, and Indonesia which is a good for Toyota as it will be easy for Toyota to export in these countries. Free trade agreement of Australia with the US is also bringing immense opportunities for Toyota to sell their goods in the US.

Australia signed bilateral tax treaties with more than 60 Jurisdictions. The agreement named covered tax agreements with the aim of neutralizing the hybrid mismatch of the arrangements in related to dual resident entities, transparent entities and abolishing of double taxation. This agreement helped Toyota to manage the double tax paid on the same income in its hosting and holding Company. The agreement also included dividend transfer transactions which provided the limitation or exempting of the rate of tax paid on the dividend by the Company resident in Australia with the contract of a different jurisdiction.

There is an imputation tax system in Australia which requires Company to present the clear flow of profits distributed to shareholders. Toyota will not allow availing the franking credits and is allowed to disseminate the income which has been generated in Australia. This provision is only applicable to Companies who are spread all around the world and has a global presence (Subedi, 2016). Thus Toyota has to maintain the set frame under the tax system. The tax rates are also denied under tax treaties which also turn to a great disadvantage for Toyota. The Australian government has come up with one of the most effective schemes named automotive transformation scheme which will promote the automobiles Companies such as Toyota, Ford, and Holden to invest and innovate in the automotive industry. This scheme will assist car business to move to South Australia.

FCAI is helping Australia in its vehicle policy with the aim of harmonizing the international regulations. This harmonization of policy and law is offering to savnge in technical resources which can utilize anywhere and further helping in producing better, cleaner and safer vehicles resulting in lower cost of production. This is satisfying many markets including multinational Companies to import the raw material easily from their parent Companies. Open and fair government procurement included key ministries and government enterprises which helped in extending the coverage of the agreement even to sub-central entities. Australia has eliminated central government-industry development program which has provided suppliers to various offsets in relation to the contracts (Clibborn, 2012). This has provided simplicity to Toyota to comply with some complicated regulations.

One of the biggest risks of branded Companies like Toyota is prevented anyone misuses their intellectual rights. Australia has entered with the US for protecting intellectual property rights including copyrights, trademarks, patents, trade secrets and enhanced means forcing any rights. This has safeguarded the interest of Toyota in losing its customers or creation of fake identity in the market.  

            Australia also entered into a general agreement on Tariffs and trade which has given enormous benefits to Toyota in terms of low tariffs and effective terms of trade. Australia also achieved the APEC goal of doing trade free by the year 2010 and leads to a great decline in the tariff and contributed to the growth of the Toyota. Australia also entered into China-Australia Free trade agreement and Korea-Australia free trade agreement this has allowed the Toyota to gain more customers from Korea and China (Bocken, et. al., 2014). Australia is also part of the convention on road safety, traffic, signals, and signs. There are around 58 national legal instruments covering the area of inland transport and monitor by UNECE. UNECE was established to a developed national legal framework for preventing death and injuries on the road. The organization has also developed some stringent rules on the manufacturing of automobiles which has to be followed and compiled by the Toyota Company.

There are many other agreements which were entered in the year 1997 and 1998 and Australia became a member. This agreement includes an adoption of uniform conditions for periodical technical inspections of wheeled vehicles and agreement concerning the establishment of global technical regulations for wheeled vehicle, parts, and equipment. The first agreement was aimed to inspect the wheeled vehicles and ensure a mutual acknowledgment of the certificates for running or taking the vehicle out of the border. This was mainly to keep vehicle environment-friendly and completely safe during the life of the vehicle (Aust, 2013). The other agreement aimed to develop global technical rules and regulations which can provide better safety to the environment such as stability electronic control, emission tests and impact through pole side. The rules were constantly added to an agreement with the aim of assuring continuous improvement in safety and technology. These rules have to comply with proper disclosures by every local and multinational Company in Australia.

References

Aust, A., 2013. Modern treaty law and practice. Cambridge University Press.

Bocken, N.M., Short, S.W., Rana, P. and Evans, S., 2014. A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production65, pp.42-56.

Bruche, G., 2010. Tata Motor’s transformational resource acquisition path: A case study of latecomer catch-up in a business group context (No. 55). Working papers of the institute of management berlin at the berlin school of economics and law (HWR Berlin).

Clibborn, S., 2012. Local responses to a global downturn: Labour adjustment in Two Multinational Companies. Journal of Industrial Relations54(1), pp.41-56.

Dunning, J.H., 2013. International Production and the Multinational Enterprise (RLE International Business). Routledge.

Lester, S., Mercurio, B. and Bartels, L. eds., 2016. Bilateral and regional trade agreements: Commentary and analysis(Vol. 1). Cambridge University Press.

Salacuse, J.W., 2010. The law of investment treaties. Oxford University Press on Demand.

Schaffer, R., Agusti, F., Dhooge, L.J. and Earle, B., 2011. International business law and its environment. Cengage Learning.

Subedi, S.P., 2016. International investment law: reconciling policy and principle. Bloomsbury Publishing.

Toyota, 2017.About Toyota.available at http://www.toyota.ae/about-toyota/. accessed on 23.08.2018

Toyota, 2017.Toyota.available at https://www.toyota.com/usa/our-story/. accessed on 23.08.2018

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