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Chapter 4 Bom 120

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  • 1. Chapter 4 The Role of Government in Business
  • 2. Government Involvement in the Economy
    • Canada has a mixed economy – our various levels of governments play a large very role in our economy
    • From the start in 1867 the National Policy was to force trade to flow East-West
    • Tariffs were used to deter the natural North-South flow of goods
    • A railroad was built with government assistance to achieve national unity!
    • Americans have less government involvement in their economy – more goods and services are provided by the private sector.This changed recently with the terrorist attacks as the government allocated funds to New York City and the airlines.
  • 3. Government’s Involvement in Business
    • Crown corporations
    • Laws and regulations
    • Taxation and financial policies
    • Financial aid
    • Government expenditures
    • Purchasing policies
    • Services
  • 4. 1. Crown Corporations
    • Governments own companies - these are called Crown Corporations
    • Examples – CBC, Canada Post, Bank of Canada
    • Some provinces use crown corporations to invest in the province – NB Liquor and NB Power is an example
    • The recent trend is towards privatization, i.e., NBTel = Aliant
  • 5. Registration, Reporting and Information
    • Companies must register “Articles of Incorporation” with the government to create a separate legal entity – the company
    • The legal entity (new company) must file tax returns and financial statements with the government
    • Companies must file statistical data with the government as requested
  • 6. 2. Laws and Regulations
    • Federal government responsibilities include :
      • Trade regulations
      • Incorporation of federal companies
      • Taxation, both direct and indirect
      • The banking and monetary system
      • National defense
      • Unemployment
      • Immigration
      • Criminal law
      • Fisheries
  • 7. Laws and Regulations cont .
    • Provincial government responsibilities include :
      • Regulation of provincial trade and commerce
      • Natural resources within their boundaries
      • Direct taxation for provincial purposes
      • Incorporation of provincial companies
      • The administration of justice
      • Health and social services
      • Municipal affairs
      • Property law
      • Labour law
      • Education
  • 8. 3. Taxation and Financial Policies
    • Sin taxes are used to discourage tax payers from using certain products. For example, cigarettes.
    • Tax credits are given to companies to encourage growth.
  • 9. Taxation of Companies
    • The federal government relies on income tax and other tax revenue to fund its activities
    • The provincial governments rely on income tax and sales tax for revenue
    • Municipal governments rely on property taxes for their revenue
    • All businesses pay various taxes ( a cost of doing business), which are passed on to the consumer in the form of higher prices
  • 10. Taxation and Financial Policies cont.
    • Fiscal Policy : the federal government’s effort to keep the economy stable by increasing or decreasing taxes or government spending.
    • Deficit : created when the government spends more than it gathers in taxes over a specific period of time.
    • National debt : the sum of government debt over time
    • Federal Budget : a comprehensive report on what the government’s financial policies will be for the following year - how much revenue will be collected and whether there will be a deficit or surplus.
    • Monetary Policy : management of the money supply and the interest rates are controlled by the Bank of Canada.
  • 11. 4. Financial Aid
    • Direct assistance to business through grants, low-interest loans, loan guarantees, consulting advice and information.
    • Equalization of transfer payments between provinces reduces fiscal disparities between the wealthier and poorer provinces.
    • Marketing Boards control the supply or pricing of some agricultural products in order to stabilize the industry.
  • 12. 5. Government Expenditures
    • Strangely enough, provincial governments put up interprovincial trade barriers (i.e., Quebec & NB) New Brunswick and Quebec increase co-operation (08/10/03)
    • Provincial governments spend billions on health, education and services - these funds are directed to local companies
    • The federal government has programs to assist business in depressed regions
  • 13. 6. Purchasing Policies
    • The government is a very large purchaser and consumer of goods and services.
    • Governments attempt, where possible, to favour local businesses in their purchasing policies including trade barriers between provinces.
  • 14. 7. Services
    • Industry Canada offers a variety of programs to help businesses get started and to promote businesses internationally.
        • Canada’s Innovation Strategy is a policy formed by the federal government to help Canada become more competitive by 2010.
        • The National Research Council supports research and technology in areas such as aerospace, biotechnology, engineering and construction, industry support and communications technology and manufacturing.
        • Department of Foreign Affairs and International Trade offers support to those businesses wishing to trade internationally.
  • 15. Progress Assessment
    • What are six categories of government involvement with business?
    • What are Crown corporations? Why were they created?
    • What does privatization refer to? Can you cite any examples?
  • 16. Progress Assessment
    • What are four responsibilities of the federal government?
    • What are three responsibilities of the provincial government?
    • Why are there interprovincial trade barriers?
    • What is the impact to the government’s revenues if it announces a decrease in taxes? Who might be affected by such a decision?
  • 17. Progress Assessment
    • How does the government manage the economy using fiscal policy?
    • What is Canada’s national debt? Has it been increasing or decreasing over the past six years?
    • Explain the purpose of the federal budget.
    • What does the term monetary policy mean? What organization is responsible for Canada’s monetary policy?
  • 18. Progress Assessment
    • Explain how governments in Canada spend tax dollars to help Canadians.
    • Give two examples of how government has provided financial aid to businesses.
    • What two groups benefit from equalization transfer payments?
    • What are marketing boards?