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The government of Australia is one of the governments in the world that tends to regulate overseas companies to investors than it does to local investors. In theory and practice, the margin of taxing and duty imposed on these investors translates to an increase in the amount needed to run a business in Australia. However, the concern the government has in regards to the businesses is majorly targeting technology companies and their pricing tendencies. The concern by government over the prices of software downloads intends to investigate why Australians are charged more than other nationals in various other nations. Inspite of the reason pushing the government to this point, other issues have a hand in this. These issues include the nature of the business, the developmental margin of Australia in terms of supporting local and international companies, and protecting the citizens of Australia from corporate exploitation.
The nature of the business of downloading software from the internet is believed by the Australian government to incur no cost for companies in terms of operating. In this case, the index of pricing cannot be connected to the model of operation. Therefore, the government of Australia is investigating the issue of over pricing because it does not believe any of its regulatory policies has had anything to do with the over pricing of software in Australia. On the other hand, the margin of Australia’s development index has slowed for the last half a decade and this has not augured well with the government. As much as the Australian government would tax everything physical or services offered by companies in her soil, it does not have any tax benefits that originate from this kind of business. Lastly, the fact that Australian government does not benefit from online trade of software, it is concerned that citizens are being exploited while other parts of the world are paying less for the same products. In this case, the government is worried that its citizens are helping overseas companies to develop their operational nations while crippling their shopping viability for locally available products and services (Solomons, 1986).
Reasons for Overpricing Software by Overseas Companies
Software development in Australia is not as pronounced as it is in the USA or Japan. This fact gives the IT companies the power to run a typical monopoly because local suppliers or developers do not match what the companies offer. Demand for local software is minimal and thus the overseas companies take the advantage to increase prices concerning the customers’ disparity and unavailability of capable competition. On the other hand, the cost of setting up physical stores, customer support offices, and delivery services is costly for the case of these overseas companies. Inspite of the fact that the Australian government refuses to admit that operational size and size of the market are playing a great deal in this situation; it is very clear that online trade is applied not only as a way of diversification, but also a compensation method. The compensation for physical investment on offices, customer support, and duty tax is offset by the high trading prices of software materials (Trompenaars & Woolliams, 2001).
Development of the Situation over Time
Overseas companies cannot be summoned by a parliamentary committee to answer to questions regarding their pricing models under normal circumstances. With the right channels followed, that is registration of the companies and submitting tax payment in time, a company may not be regulated any further. However, if the company is involved in illegal business or intimidating practices harmful to other business models, the company can be banned from doing business in that particular nation (Wilson, 2001). For the current case of Australia and big tech companies like Apple and Microsoft, the situation may not be changed by these companies complying with the government pleas. However, the market share for Apple and Microsoft may decline with time if the government funds local developers to take the initiative of developing cheaper software and other online services. On the other hand, if Apple and Microsoft consider withdrawing from Australia market in terms of physical investment, they can lower their software prices and attract another segment of the market.
Solomons, D. (1986). Making Accounting Policy: The Quest for Credibility, Oxford University Press.
Trompenaars, F. and Woolliams, P. (2001).When Two Worlds Collide in The Financial Times Handbook of Management, 2nd edn, FT Publishing.
Wilson, T. (2001). “Rewards that work: mastering people management,” Financial Times, Nov. 5.