Office Depot's international expansion and administrative law compliance

New Initiatives

Company Initiative Analysis

Analysis of New Initiative by Office Depot

Office Depot is a company that was incorporated in 1986, and that year opened its first store in Fort Lauderdale, FL that year (Office Depot, 2012). The company has continued to expand during the past 26 years and continues that tradition by initiating plans to move even farther with its international business. According to one portion of the company website "In addition to doing business in 47 countries, Office Depot has over 1,500 retail locations across the globe. In the U.S., Office Depot has stores in 49 states with 34 Distribution Centers or Crossdock facilities scattered across the country" (Office Depot, 2012). However, this global acquisition and expansion is currently only in the early stages. The company has plans to expand its reach in the United States and abroad by partnering with similar firms in other parts of the world, via acquisitions of companies that make the Office Depot a more efficient company, and by making agreements with local entities across the globe. This paper examines the company, the associated administrative law, other applicable laws, and provides recommendations for the Office Depot going forward.

Administrative Law

The United States government is mad of three branches that control many aspect of the daily lives of the citizens in America and different aspects of the lives of those abroad who fall under the umbrella of the United States. However, sometimes there are issues that have to be handled more specifically and that is where administrative law comes in. Agencies such as the SEC, FDA, FAA and others make regulations for businesses that control how they conduct certain areas of that business and are binding (Bamberger, 2006).

There are two administrations within the United States government that would be most concerned with what Office Depot is going to do in the next five years with its expansion plans. The Internal Revenue Service is not just concerned with the revenue that a company makes in its domestic operations, but, since the company is headquartered in the U.S., the sales that it makes overseas as well. Of particular interest also, and something that has been much debated for about the last decade (Swartz, 2003) is how taxation will be affected by e-commerce (which will also be discussed in the next section). The other administration agent most concerned is the SEC and how the company will file earnings and dividends from its overseas operations.

Income, whether for an individual or a business, is taxed as if the business were all conducted on U.S. soil. But, there are some caveats to that. The United States recognizes that international businesses that are headquartered in the U.S. will be subject to taxation in most countries they operate in around the world. So, there are breaks that are given on corporate taxation for companies that conduct a large part of their business overseas. One of the main reasons that companies move manufacturing plants to different countries is because of their favorable tax laws and the fact that the U.S. is restricted as far as taxation for the overseas business (Patukhov, 2009). When the Office Depot moves more of its operations overseas, especially when it moves major operations such as supply warehouses (a major push through the year 2015), the IRS will closely monitor how the company is filing its taxes and whether they are remaining in compliance with U.S. law.

The SEC also has a stake in the international movements of U.S. companies. The Office Depot is required to file all of its earnings statements for U.S. accountability (Bamberger, 2006), but they may also be required to do the same thing in the countries that they are operating in currently and expanding into (Barney, 2009). Since Office Depot is planning to make major incursions in the Asian market in the next ten years (specifically China and Mumbai, India), the company will possibly have to deal with new accounting standards that are not yet recognized by the U.S. Although there have been many efforts to level accountancy standards around the globe, these are not yet finalized for countries such as the U.S. (Barney, 2009). However, the new standards will likely be accepted by every major nation within the next five years, so Office Depot will only have to deal with one set going forward.

E-Commerce Law

Every business, no matter how large or small, can sell internationally using the internet. Global websites such as Etsy.com allow even the smallest homemade products to be sold to people around the globe. The issue in the past has been how can that trade be governed so that it remains open and equitable. E-commerce law as it applies to any company is still in its infancy stages (Patukhov, 2009). The main issue again, is how is a large company (or even a small one) taxed for the income that it realizes overseas? More specifically, how can the U.S. government receive the fair share of taxation, and regulate it, when the purchaser and the purchase originate in the U.S., but occur in a foreign location (Swartz, 2003). This is a problem that governments, local and federal, have been having since the inception of e-commerce more than a decade ago. The issue here is not a new one for Office Depot because they have been doing business internationally for several years, but how the government can continue to regulate the purchasing of Office Depot products when other countries are becoming much more involved in the process is a problem (Patukhov, 2009).

E-commerce becomes an even bigger issue when the only part of the process that takes place in the United States is filing the transaction electronically in a U.S.-based computer. Because the product was neither ordered, handled or shipped from a U.S. location, it does not seem that the U.S. should be able to receive any taxation for that transaction. This is the primary dilemma that Office Depot may have going forward because the U.S. is trying to close the loopholes that now exist.