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

1. Week 3
Chapter 3 – The Role of Government in
Business

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. 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: http://commons.wikimedia.org

4. Historical Role of Government in the Economy
A railroad was
built with government
assistance to achieve
national unity!
Image source: http://commons.wikimedia.org

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. 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: http://upload.wikimedia.org

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. 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. 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. Laws are derived from four sources:
the
Constitution
precedents
established
by judges
provincial and
federal statutes
(laws)
federal and
provincial
administrative
agencies

11. The Supreme Court of Canada has the final decision on
constitutional questions and on important cases of civil and
criminal law.

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

14. 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.

15. 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

16. 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

17. The Role of Government: Municipal Government Responsibilities

18. 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.

19. 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

20. 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.

21. Exercise: Should governments be in the gambling business?

22. 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.

23. 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.

24. 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

25. 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.

26. Government Departments
Industry Canada
grants articles of
incorporation,
maintains records,
and ensures fair
competition.
Image source: http://www.ic.gc.ca/ic_wp-pa.htm

27. 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.

28. 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

29. Government Departments – DFAIT

30. Figure 3.5 Government Departments

31. 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.

32. 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

33. 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.

34. 34
Homework

35. Image source: http://www.flickr.com/photos/vernhart/