Chapter 8.pdf

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Dave Swanston

Chapter 6- The Role of Government in Business Government Involvement in Economy • Canadian economic system is mixed economy; some allocation of resources is made by the market and some by the government • National Policy- Government directive that placed high tariffs on imports from the U.S to protect Canadian manufacturing, which had higher costs • Different levels of government are large employers in the country Government Affects Business in 6 ways: Crown Corporations • There are hundreds of such companies and they play an important role in the economy; sometimes compete with for profit businesses • Crown Corporation- A company that is owned by the federal or provincial government • Exist for several reasons:  Provide services that were not being provided by businesses  Bail out a major industry in trouble  Provided special services that could not otherwise be made available • The financial role of two special provincial crown corporations  The Alberta Heritage Savings Trust Fund must operate on a sound financial basis, and it makes investment decisions that will benefit Alberta  Quebec Deposit and Investment Fund handles funds of Quebec and is an investment vehicle that is used to guide economic development • The role for government  Federal and provincial governments have embarked upon a series of measures designed to reduce the role of government in economy  Privatization- The process of governments selling Crown corporations  Government agencies are also looking at ways to lower costs and improve efficiencies Laws and Regulations • Cover a wide range from taxation and consumer protection to environmental controls, working conditions, and labour- management relations • Laws are derived from four sources: the Constitution, precedes established by judges, provincial and federal statues, and federal and provincial administrative agencies • Federal government responsibilities  Responsibility is to ensure and support the country’s economic performance  Other responsibilities that may have an impact on business operations: o Trade regulations (interprovincial and international) o Incorporation of federal companies o Taxation (both direct and indirect) o The banking and monetary system o National defence o Unemployment o Immigration o Criminal Law o Fisheries  The federal government lobbies other country governments to decrease such trade barriers in an attempt to create business opportunities for Canadian firms • Marketing boards  Marketing Boards- Organizations that control the supply or pricing of certain agricultural productions in Canada and this supply management is designed to give some stability to an important area of the economy that is normally very volatile  When farmers are suffering, they no longer buy new equipment and consumer goods and their communities feel the effects of ample cash flow  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  The Canadian system of marketing boards has been attacked because it does not permit normal competitive conditions to operate in this field and this distorts the whole industry and raises prices to Canadian consumers • Provincial government responsibilities  Each province has its own government and provincial governments are responsible for: o Regulation of provincial trade and commerce o Natural resources within their boundaries o Direct taxation for provincial purposes o Incorporation of provincial purposes o Licensing for revenue purposes o The administration of justice o Health and social services o Municipal affairs o Property law o Labour law o Education  The participation of all provincial governments in federal- provincial, shared cost arrangements for hospital insurance and Medicare has helped ensure nationwide standards of service, despite some differences in their modes of financing and program coverage • Education  Both the federal and provincial governments run their own student loan programs  Federal government plans to phase out interest and other debt relief options for borrowers under Canada Student Loans Programs  Changes to the student loan program include it being the first province to eliminate interest on student loans and extending a long running freeze on tuition fees in order to ease the burden of student debt for students of Newfoundland and Labrador • Municipal government responsibilities  Set up by provincial legislatures and their authority is defined by the specific province in which they operate  Municipalities play a role in consumer protection o For example, they have regulations and laws regarding any establishment that serves food  Also responsible for setting zoning requirements, speed limits, and business licences Taxation and Financial Policies • All levels of government collect taxes; taxation is also fine tuned by government to achieve certain goals or to give effect to certain policies  Fiscal Policy • Revenue collected from taxes allows governments to discharge their legal obligations and is used to pay for public services, pay down debt, and fund government operations and programs • Taxes are also used for encouraging/discouraging taxpayers from consumption of certain goods • Taxes are levied from variety of sources such as income, sales, and property taxes • Stabilizing the economy through fiscal policy  Fiscal Policy- The federal government’s effort to keep the economy stable by increasing or decreasing taxes or government spending  Taxes: o Increase when economy is booming to cool it off and slow down inflation o Decrease when economy is weak to stimulate it  Government spending: o Government spends money in many areas o Deficit- Occurs when government spends over and above the amount it gathers in taxes for specific period of time o One way to lessen annual deficits is to cut government spending, however some believe that spending by government helps economy grow while others believe that the money the government spends comes out of
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