1. The Role of Government in Business
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

2. Learning Goals
Understand the six categories of government activities that can affect business.
Trace the historical role of government in the Canadian economy and understand why Crown Corporations were created.
Discuss why understanding laws and regulations at all levels of government is critical to business success.
Explain how taxation and financial policies affect the Canadian economy.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

3. Government’s Involvement in Business
Can be divided into six categories:
Crown corporations
Laws and regulations
Taxation and financial policies
Financial aid
Government expenditures
Purchasing policies
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

4. Some background information:
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5. A company that is owned by the federal or provincial government.
Crown Corporations
A company that is owned by the federal or provincial government.
Some Example of these are:
Canada Post
Canada Mortgage and Housing
NB Power
CBC
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

6. Why would they set up a Crown Corporation
Provide services that were not being provided by businesses (1930 Air Canada)
To bail out a major industry in trouble (1919 Canadian National Railway)
Provide specialized services that could not otherwise be provided (Atomic Energy of Canada)
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

7. Privatization
The process of governments selling off Crown Corporations.
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8. Laws and Regulations
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9. 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
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11. 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
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12. Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

13. Laws and Regulations Cont
Municipal Government
Regulations and laws on places that serve food
Community Zoning Laws
Speed Limits in the community
Building permits, municipal licenses (dog tags, taxes, water)
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

14. Taxation and Financial Policies
Taxes (revenue, income and property) are the major bases of tax revenues.
Taxes are used a a source of funding for government activities.
Sin taxes are used to discourage tax payers from using certain products. For example, cigarettes.
Tax credits are given to companies to encourage growth.
All businesses pay various taxes (a cost of doing business), which are passed on to the consumer in the form of higher prices.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

15. 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 - today Canada’s debt totals less than $500 billion.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

16. Taxation and Financial Policies cont.
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.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

17. 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.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

18. 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.
Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson