Introduction to Visa Inc. and the Australian Government

Visa Inc. was founded in 1958 as Bank Americard, and it is an American organisation which operates in the financial services industry (Visa, 2018). Since its incorporation, the enterprise has expanded its operations in different locations of the world, and it offers the facility of electronic fund transfer through its credit cards, debit cards, and gift cards, however, the company did not operate in China. The services of the company are available across the globe. Currently, the organisation is the world’s second-largest card payment company in terms of card payment transactions and number of issued cards (Forbes, 2018a). The corporation has gained a positive brand image worldwide because it is known for its e and reliable financial services which are available globally. The headquarters of the enterprise is situated in Foster City, California, United States. The company has hired more than 15,000 employees globally (Forbes, 2018b). The company has not disclosed the information about an exact number of employees in Australia.

The government of Australia is responsible for taking appropriate legal measures in the country in order to establish a legal framework which is suitable for the economic growth of the country. The objective of the policies implemented by the government is to ensure that corporations are ethically operating in the country. The government focuses on ensuring that the multinational corporations which establish their operation in Australia to offer their products and services to Australian citizens comply with these policies. The purpose of the regulatory framework is to ensure the safety of customers is maintained, and corporations which offer their products maintain a high level of standard regarding protecting the interest of customers (RBA, 2018). The Australian government is strict when it comes to the imposition of these regulations, and the government imposes heavy penalties on corporations which breach these policies. On the other hand, multinational corporations contribute to the economy of Australia; therefore, the government also promotes their operations by making changes in their regulatory policies. Visa Inc. has to comply with the taxation policies in Australia while offering its services in the country. The implementation of taxation policies is important in Australia since the tax collected from multinational enterprises contributes to the overall GDP of the country which is invested by the government in projects to develop the country and improve the lifestyle of its citizens (Bell and Hindmoor, 2014).

The revenue generated by Visa Inc. is liable for tax at a rate of 30 percent, however, this rate is not fixed, and the government has the power to change this rate in order to collect more or less tax from companies (AOH, 2018). Visa Inc. operates in the financial services industry, and it offers finance related services to its customers situated in Australia. As per the taxation policy of Australia, the company is subject to the Goods and Services Tax as well. The government imposes GST on all territories in Australia based on which Visa Inc. has to pay GST on its services at 10 percent. Just as the corporate tax rate, the government has the power to change the GST rate as well in order to collect more or less tax from the enterprises. Furthermore, the Australian government is serious about the rights of employees who work in multinational corporations because they have an image to exploit workers for their own benefits. Thus, in order to stop unfair treatment with employees, the Australian government has imposed the Fair Work Act 2009 (Read and Dealing, 2013). This act is established by the government to stop enterprises from treating their employees like machines and provides them right to claim compensation from their employer.

Taxation Policy for Multinational Enterprises

The act provides various rights to employees which Visa Inc. has to ensure while hiring employees in Australia. The act provides provisions regarding various factors such as overtime pay, minimum wage, working hours, safety policies at the workplace and others which Visa Inc. has to comply with (McCrystal, 2012). The corporations which did comply with these policies have to pay compensation to their employees, and the court can also impose penalties on them. Another key regulation which has given importance in Australia is the Competition and Consumer Act 2010. The act provides rules regarding the promotion of competition in Australian markets while at the same time safeguarding the interest of customers. Multinational enterprises are large in size, and they have the resources to deal unfairly in the market in order to eliminate their competition to gain a monopoly in the industry (See, 2015). They focus on entering into an agreement with other corporations so that they can eliminate competition from the Australian market which is not good for the economy of the country. Thus, in order to tackle this issue, the government has imposed this act based on which multinational corporations cannot misuse their position. For example, in 2015, Visa Inc. was charged by the Australian Competition and Consumer Commission for breaching the policies of this act and engaging in anti-competitive conduct.

Visa Inc. formed an agreement with Dynamic Currency Conversion (DCC) to collect substantial revenue from the provision of their service of currency conversion. Based on this agreement, the company unfairly blocked its customers and forced them to use its services in a certain way which resulted in increasing the revenue for the enterprise. Visa Inc. was found guilty of breaching the regulations of this act by engaging in anti-competitive conduct; therefore, the court imposed a penalty of $18 million on the company (ACCC, 2015). Furthermore, Visa Inc. has to comply with the provisions given under the Corporations Act 2001 (Cth) which applies to all territories in Australia. The act includes various guidelines regarding the preparation of necessary documents and continuous disclosure requirements which Visa Inc. has to comply with while operating in Australia. The company also has to ensure that it fulfills the regulations imposed by the Fair Trading Act 1992. This act is focused on eliminating any unfair trading activities in which corporations indulge in to gain an unfair advantage (Austlii, 2018). Based on the policies of this treaty, Visa Inc. has to ensure that it fairly deals with its suppliers and other services provides while keeping the safety and the best interest of customers in mind. Thus, Visa Inc. has to ensure that it complies with these guidelines imposed by the Australian government in order to avoid facing penalties which resulted in reducing its profitability and brand image.

The Australian government enters into a number of treading conventions and treaties with other nations in order to build strong trade relationships with them. The main objective of nations while forming these agreements is to ensure that they both get advantage from such treaties. These treaties make the process of establishing and expanding operations in other nations easier for enterprises. It resulted in increasing the export rates of an enterprise. On the other hand, another country benefits from the trading practices as well because a substantial amount of foreign currency is coming to the country which supports it economic growth. Based on these agreements, the governments decide to reduce the number of legal regulations and frameworks which corporations have to follow while expanding their operations in overseas markets. Furthermore, they also give them financial support by removing tariff, excise duty, registration fees, and other charges which companies have to pay otherwise (DFAT, 2018). It encourages corporations to expand their operations in new markets to exploit their opportunities. It also increases the customer base of companies which positive influence its profitability. Similarly, the treaties which are formed by the Australian government with other nations resulted in benefiting or creating challenges for Visa Inc. while operating in Australia.

Fair Work Act 2009: Protection of Employee Rights

Firstly, the revenue which is generated by Visa Inc. is sent back to the headquarters of the company. The company invests such money in global expansion and achieving its corporate objectives. Thus, the treaty signed between the United States and Australian government regarding avoidance of double taxation is beneficial for Visa Inc. The treaty removes the provision of imposing a double tax on the income of multinational corporations while they are sending back their revenue to their domestic country (US Taxes, 2018). Therefore, Visa Inc. is able to save money on taxes while transferring the profits of the company back to its home country which assists it in improving the services which it offers by expanding them across the globe. Another key treaty which creates new business opportunities for Visa Inc. is the free trade agreement which is formed between the United States and Australia. The agreement is titled AUSFTA or Australia United States Free Trade Agreement. This is a trade-related treaty which is signed by both nations to promote trade relationships between them (Lopert and Gleeson, 2013). As per the terms of this treaty, both nations remove the strict and rigid legal frameworks which corporations have to comply with while they are expanding their operation in either market.

The country reduces the number of regulations and standards which companies have to meet in order to expand their operations in such countries. It encourages multinational enterprises such as Visa Inc. to reach a wider audience by expanding their operations in overseas markets. Moreover, the treaty reduces excise duty, tariff and other charges which corporations have to pay which resulted in reducing their profitability (Armstrong, 2015). The objective of these terms is to increase trading practices between the two nations to support the economy of both nations. As per this treaty, Visa Inc. is able to easily expand its operations in Australia and offers various finance related services to its customers. The treaty increased the customer base of the enterprise which resulted in increasing its revenue generation ability. Visa Inc. also offers its services in New Zealand, and the strong trading ties between Australia and New Zealand benefits the company by expanding its operations in both nations. Closer Economic Relations (CER) is a treaty which is signed by the governments of both nations. The agreement is a free trade agreement, and its objective is to promote trade practices between the two countries in order to support their economic development (Kehoe and Ruhl, 2013). The objective of this treaty is to remove trade restrictions between both countries to increase the flow of foreign currency in order to support the economy of both nations. Due to this treaty, Visa Inc. is able to seamlessly offer its services in both nations which build its customer base.

The company has generated a competitive advantage due to the ease of availability of its services. Thus, based on this treaty, the company is able to deliver high-quality services to its customers who reside in both Australia and New Zealand. AANZFTA or ASEAN Australia New Zealand Free Trade Agreement is another treaty which is formed between the two nations. This treaty is also relating to increasing the trade relationship between the two nations with an objective to build strong ties which support the economy of both countries (Tseuoa, Syaukat, and Hakim, 2012). Due to this treaty, Visa Inc. is able to ensure that it offers effective financial services to its customers without delaying their online payments. The treaty increases the efficiency in the operations of Visa Inc. due to which the company is able to generate a competitive advantage in the market which is crucial for its success.  Therefore, the treaties, conventions, and agreements which are formed between two nations create new business opportunities for multinational companies based on which they are able to avoid legal restrictions and expand their operations in overseas markets.

References

ACCC. (2015) Visa ordered to pay $18 million penalty for anti-competitive conduct following ACCC action. [Online] Available at: https://www.accc.gov.au/media-release/visa-ordered-to-pay-18-million-penalty-for-anti-competitive-conduct-following-accc-action [Accessed 31/08/2018].

APH. (2018) Small business company tax rate changes. [Online] Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201617/Smallbusiness [Accessed 31/08/2018].

Armstrong, S. (2015) The economic impact of the Australia–US free trade agreement. Australian Journal of International Affairs, 69(5), pp.513-537.

Austlii. (2018) Fair Trading (Australian Consumer Law) Act 1992. [Online] Available at: https://classic.austlii.edu.au/au/legis/act/consol_act/ftcla1992356/ [Accessed 31/08/2018].

Bell, S. and Hindmoor, A. (2014) The structural power of business and the power of ideas: The strange case of the Australian mining tax. New Political Economy, 19(3), pp.470-486.

DFAT. (2018) The Australian Treaty Database. [Online] Available at: https://www.info.dfat.gov.au/TREATIES [Accessed 31/08/2018].

Forbes. (2018a) AmEx Is Likely To Become The Second Largest U.S. Card Processing Company This Year. [Online] Available at: https://www.forbes.com/sites/greatspeculations/2018/05/29/amex-is-likely-to-become-the-second-largest-u-s-card-processing-company-this-year/#545f0a0c4fa0 [Accessed 31/08/2018].

Forbes. (2018b) Visa. [Online] Available at: https://www.forbes.com/companies/visa/ [Accessed 31/08/2018].

Kehoe, T.J. and Ruhl, K.J. (2013) How important is the new goods margin in international trade?. Journal of Political Economy, 121(2), pp.358-392.

Lopert, R. and Gleeson, D. (2013) The high price of “free” trade: US trade agreements and access to medicines. The Journal of Law, Medicine & Ethics, 41(1), pp.199-223.

McCrystal, S. (2012) The relationship between protected industrial action, recognition and bargaining in good faith under the Fair Work Act 2009. Rediscovering Collective Bargaining: Australia’s Fair Work Act in International Perspective, pp.114-134.

RBA. (2018) Credit card regulatory framework. [Online] Available at: https://www.rba.gov.au/payments-and-infrastructure/credit-cards/regulatory-framework.html [Accessed 31/08/2018].

Read, R. and Dealing, D. (2013) Union Recognition and Good Faith Bargaining under the Fair Work Act 2009’(2012). Australian Journal of Labour Law, 25, p.130.

See, V.E.T. (2015) Competition Act 2010: the issues and challenges. European Journal of Law and Economics, 40(3), pp.587-616.

Tseuoa, T., Syaukat, Y. and Hakim, D.B. (2012) The impact of Australia and New Zealand Free Trade Agreement on the beef industry in Indonesia. Journal of ISSAAS, 18(2), pp.70-82.

US Taxes. (2018) U.S. Australia Income Tax Treaty and Explanation. [Online] Available at: https://www.ustaxes.com.au/credentials/u-s-australia-income-tax-treaty-and-explanation/ [Accessed 31/08/2018].

Visa. (2018) About Visa. [Online] Available at: https://usa.visa.com/about-visa.html [Accessed 31/08/2018].