Influence: Government policy Flashcards
What is government policy ?
All businesses operate in a political–legal environment. Government policies change from time to time, most notably due to a change in government or a change in social expectations. Government policy is, therefore, a notable source of change and a significant influence on business operations.
Policies affecting business operations include; monetary and fiscal policy; taxation rates; materials handling practices and waste disposal; Work Health and Safety standards; environmental policies such as carbon pricing, employment relations; and research and development grants. Operations managers need to be fully aware of the contemporary government policies and what they comprise.
What is the IKEA case study?
Extract from ‘How multinationals shift billions in revenue offshore and what Labor plans to do about it’ from ABC 9 May 2019
Multinationals, which are legally channeling billions of dollars of revenue earned in Australia to low-tax jurisdictions such as Singapore and the Netherlands, could be caught by Labor’s proposed policies to apply tougher taxing rules.
Labor wants to deny multinationals a deduction when they send royalty payments to related companies that pose a multinational tax risk.
Labor estimates this would improve the budget bottom line by $680m over the forward estimates and $2.3b over the “medium term”.
Swedish furniture giant Ikea has for years paid billions in “franchise fees”, royalties and licence payments to its European parent to reduce its taxable income. It is currently under investigation by the European Commission about whether its tax arrangement with its Netherlands subsidiary allows it to heavily reduce its tax bill on revenue from stores around the world.
Its local accounts for the year ending August 31, 2018, show Ikea’s gross profit of $530.6 million in 2018 was reduced via several expenses and fees. Among them was $43.5 million in “franchise fees” and another $129.7 million in “other expenses”. The company ended up posting a $12.7 million loss for the year, and reported a $7.2 million income tax benefit. Ikea’s accounts also show it loaded up with debt, with total liabilities owed to its offshore parent hitting $578.7 million in 2018.
A spokesperson for the company said, “IKEA pays all taxes incurred in accordance with Australian laws and regulations” and the company provided about 4,000 local jobs.
