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Bus106 wk3 ch3 role of government in business


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BUS106 The Role of Government in Business- from UNDERSTANDING CANADIAN BUSINESS, 7th Cdn Edition
(custom publication for Seneca) ; - published by McGraw-Hill

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Bus106 wk3 ch3 role of government in business

  1. 1. Week 3 Chapter 3 – The Role of Government in Business
  2. 2. Learning Objectives Historical role of government • Why Crown Corporations were created The six categories of government activity Understanding laws and regulations at all levels of gov’t is critical to business success. Taxation and financial policies affect the Canadian economy. Government expenditures benefit consumers and businesses alike. Government purchasing policies and services assist Canadian businesses.
  3. 3. Historical Role of Government in the Economy Canada has a mixed economy; our various levels of governments play a very large 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. Image source:
  4. 4. Historical Role of Government in the Economy A railroad was built with government assistance to achieve national unity! Image source:
  5. 5. Government activities that affect business may be divided into six categories: Crown Corporations Laws and Regulations Taxation and Financial Policies Government Expenditures Purchasing Policies Services
  6. 6. Crown Corporations - companies that are owned by the federal or provincial governments. Provided services that were not being provided by businesses (Air Canada in the 1930s) Crown corporations were created to bail out a major industry in trouble (Canadian National Railway in 1919) Provided some special services that could not otherwise be made available (Bank of Canada) Image source:
  7. 7. Figure 3.2: A brief list of the top Crown corporations in Canada Source: “Largest Crown Corporations,” Financial Post Business, 2 June 2009, p. 82. Material reprinted with the express permission of The National Post Company.
  8. 8. Privatization - the process of selling publicly-owned corporations. Since the 1990s, federal and provincial governments have embarked upon a series of measures designed to reduce the role of government in the economy. Over the years, former large corporations like Teleglobe Canada, Air Canada, and Canadian National Railway (CNR) were sold.
  9. 9. Laws and Regulations Laws and regulations are created by the politicians who have been elected by Canadians. Consequently, the political parties in power can greatly affect the business environment.
  10. 10. Laws are derived from four sources: the Constitution precedents established by judges provincial and federal statutes (laws) federal and provincial administrative agencies
  11. 11. The Supreme Court of Canada has the final decision on constitutional questions and on important cases of civil and criminal law.
  12. 12. The federal government is responsible for issues that affect citizens across Canada - responsibilities that may have an impact on business operations include: trade regulations (interprovincial and international) incorporation of federal companies taxation (both direct and indirect) the banking and monetary system national defence Unemployment Immigration criminal law fisheries
  13. 13. Marketing boards control the supply or pricing of certain agricultural products. Consequently, they often control trade To smooth out the effects of these unusual conditions on this sector of our economy, and to ensure a steady supply of food to consumers at reasonable prices, six government agencies have been set up to control wheat and barley, dairy products, and poultry.
  14. 14. The Role of Government: Marketing Boards Canadian Wheat Board Canadian Dairy Commission Canadian Egg Marketing Agency Chicken Farmers of Canada Canadian Turkey Marketing Agency Canadian Broiler Hatching Egg Marketing Agency
  15. 15. Provincial governments are responsible for the following areas: regulation of provincial trade and commerce natural resources within their boundaries direct taxation for provincial purposes incorporation of provincial companies licensing for revenue purposes the administration of justice health and social services municipal affairs property law labour law education
  16. 16. The Role of Government: Municipal Government Responsibilities
  17. 17. 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.
  18. 18. Two halves of Fiscal Policy reductions in the national debt have been the result of surpluses; a surplus is an excess of revenues over expenditures deficit surplus national debt takes $ away from the private sector
  19. 19. With the money it obtains from taxes, the federal government is the largest buyer of goods and services. Federal procurement policies can be used to influence regional economies and companies. NAFTA places limits on the federal government’s ability to use this spending power.
  20. 20. Exercise: Should governments be in the gambling business?
  21. 21. Government Spending: Monetary Policy Monetary policy is the management of the money supply and interest rates. It is controlled by the Bank of Canada. The more money the Bank of Canada makes available to business people and others, the faster the economy grows. To slow the economy, the Bank of Canada lowers the money supply.
  22. 22. Other Government Policies Provincial governments put up interprovincial trade barriers. Provincial governments spend billions on health, education, and social services; these funds are directed to local companies. Various governments may cooperate to provide loans, grants, or support for projects like Hibernia.
  23. 23. Government Expenditures The federal government has programs to assist business in depressed regions. Governments also spend huge sums of money on: education| health | roads | ports | waterways | airports various other services required by businesses and individuals
  24. 24. Government Expenditures: Purchasing Policies Contracts are awarded most often to help Canadian businesses even if they are sometimes more expensive than bids by non-Canadian companies.
  25. 25. Government Departments Industry Canada grants articles of incorporation, maintains records, and ensures fair competition. Image source:
  26. 26. Protecting Canadian Consumers Industry Canada regulates food ingredients, clothing labels, measurement accuracy of scales, and fuel pumps. Business must be aware that this department is responsible for product and consumer safety. There are legal responsibilities placed upon business by the federal government through various regulations and acts of Parliament.
  27. 27. Government Departments NRC: National Research Council Established in 1916 Employs over 3,000 scientists and technicians Responsible for science and technology Promotes research and development Helps Canadian industry to innovate and remain competitive
  28. 28. Government Departments – DFAIT
  29. 29. Figure 3.5 Government Departments
  30. 30. Other Government Departments Protect Consumers CDIC insures all deposits in financial institutions up to $60,000. Provincial Governments regulate the stock exchanges in Canada, setting the rules for all public companies. Municipal Governments inspect buildings, set zoning regulations, license businesses, tax water, charge fees, regulate parking, etc.
  31. 31. Chapter Summary Historical role of government • provided services that were not being provided by businesses. The six categories of government activity • The six categories are Crown corporations, laws and regulations, taxation and financial policies, government expenditures, purchasing policies, and services. Understanding laws and regulations at all levels of government is critical to business success. • Federal laws, provincial laws, municipal rules and regulations
  32. 32. Chapter Summary Taxation and financial policies affect the Canadian economy. • Fiscal policy and monetary policy Government expenditures benefit consumers and businesses alike. • education, health, roads, ports, waterways, airports, and various other services required by businesses and individuals. Government purchasing policies and services assist Canadian businesses.
  33. 33. 34 Homework
  34. 34. Image source: