Chapter 4 - Role of Government -Crown Corporations -Taxation & Financial Policies -Laws & Regulations -Government Expenditures -Purchasing Policies -Services

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Published on 16 Oct 2011
School
University of Waterloo
Department
Accounting & Financial Management
Course
AFM131
Chapter 4: The Role of Government
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Government activities that affect business:
1. Crown Corporation
2. Laws and Regulations
3. Taxation and Financial Policies
4. Government Expenditures
5. Purchasing Policies
6. Services
Crown Corporations: A company that is owned by the federal or provincial government
There are hundreds of such companies, and they play an important role in the economy
They usually own big companies like, Air Canada, Canadian Railway and electrical
companies
Privatization: occurs when the government sells the Crown corporation (as a way to reduce
the role of government in the economy)
Laws and Regulations
Laws and regulations are formed by politicians, especially those in power
Federal government responsibilities:
o Taxation
o National defense
o Unemployment
o Criminal law
o Fisheries
o Trade laws
o Banking
Provincial government responsibilities:
o Education
o Health and social services
o Municipal affairs
o Property law
o Labour law
o Licensing for revenue purposes
Taxation and Financial Policies
Taxes are used to redistribute wealth, pay off debt, fund public services (fire, police, library)
Sin taxes are set in place to reduce the use of products (cigarettes, alcohol) – in hopes that the
additional increase will reduce consumption
Taxes come from a variety of sources: personal, sales, property
Fiscal Policy: are set in place to stabilize the economy by increasing or decreasing taxes or
government spending
o High tax rates slow the economy, and lower small business ownership (used to
cool off spending to avoid inflation)
o Lower tax rates boost the economy (used to stimulate economy when weak)
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