Chapter 4 Bom 120


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Chapter 4 Bom 120

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