GOVERNMENT INFLUENCE

GOVERNMENT INFLUENCEChapter 5: What Makes a Successful Business

Bus. Ed 9Ch. 5 NotesPg. 102 - 106AgendaTaxesControl of DistributionMarketing BoardsAntitrust LegislationMoney SupplyLicensing and PermitsOther RegulationsHealth & Safety RegulationQuality ControlEthical Business Practices

TaxesWhy do we pay taxes?Government services such as education, health care, police and fire protection, highways, and the court system.How do we generate money to pay for government services?HST or GST & PSTIncome taxGas, liquor, and tobacco taxesDuty taxes

What does HST stand for? Harmonized Sales Tax is a value added tax that combines 5% GST (federal portion) and a 7% PST (provincial portion) into one tax paid on almost all purchases of goods and services. The HST came into effect in July 2010.

When BC switched over to the HST, the HST added on 7% of sales tax to newspapers, adult sized clothing for children, shoe repairs, tailoring services, dry cleaning, snack foodsrestaurant meals, and the list goes on and on. So instead of paying 5% GST on these products, consumers were now spending 12% HST on the products.

I am not going to get into what GST & PST are because we are going to be doing a short activity on the new PST & GST, which is going to be implemented in 2013.

Income Tax when you are out in the workforce each pay check you receive you will have a certain percentage deducted from each pay check, this deduction is income tax

There are also certain products that have extra taxes added on gas, alcohol and tobacco are examples of products that the government has added extra taxes. Alcohol and tobacco are examples of products that have a tax specifically charged on because it is a generally socially prohibited good.

Businesses dealing with with products such as the sale of alcohol and tobacco, they must be aware that the costs of these taxes should be included in the prices they charge the consumer.

Duty tax are taxes the government imposes on consumers for goods and services purchased out side of Canada. For example: if you go shopping in the US for the day and spent over $200 on goods and services, the Canadian border patrol may ask you to pay taxes on the good brought back into Canada from the US.3Control of DistributionGovernment can play a dual role in the distribution of productsWants to control the supply of a product

Wants to encourage free market and opposes control of supply

For example: the government wants to control the supply of milk because it is a consumer necessity product. To prevent a price increase and to encourage the stability of milk in the economy, the government controls milk by creating a milk marketing boards.

For most products like soft drinks, running shoes, and automobiles, the government wants to encourage a free market and opposes the control of supply, this is why the government passed the antitrust legislation4Marketing BoardsA government organization that controls the manufacturing, processing, distribution, and supply of a product or service

Examples of marketing boards include milk, chicken, and eggs.

Again these marketing boards are created to prevent price increases that may happen in a free market; the marketing boards also encourage the stability of supply of the products.

5Marketing Boards

Milk marketing boards control the sale and distribution of dairy products in CanadaDairy farmers in Canada must belong to the milk marketing board. You cannot produce milk for sale in Canada unless the farm has been approved by the board.

6Ontarios Milk Marketing Board Milk Commercial

Because dairy farmers in Canada must belong to the milk marketing board. The marketing board also controls the promotion of milk. Here is an example of an add that the Ontario Milk Marketing Board created. Marketing boards often want to promote their product in order to increase demand.

Other ways marketing boards can increase demand for their product is by publishing recipe's that call for their product.

7Antitrust LegislationFor products other than agricultural, the government wants no control on the supply of any product or service by any businesses

Even though some companies are large enough they can influence the market on their own, the government in Canada does not permitted businesses to control the supply, price, or distribution of products and services in the marketplace. It is not permitted under the federal Competition Act, which encourages a free market system.8Money SupplyThe Bank of CanadaEstablished in 1934Canadas central bankRegulates the money supply in CanadaSets cost of borrowing for major banksControls amount of money in circulation

The Bank of Canada is controlled by the government

The role of the Bank is to promote the economic and financial well-being of Canada

Major banks in Canada include: CIBC, TD Canada Trust, RBC Royal Bank, Scotia bank, BMO Bank of Montreal. These banks use the set rate given by the Bank of Canada to determine the interest rate for their customers.

The Bank of Canada also controls the amount of money in circulation, the bank tries to ensure that the money supply grows fast enough to permit business production and employment growth, but not so fast that it causes inflation.

inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer good, thus people purchasing power decrease with inflation.

9Licensing and PermitsOwners of some businesses have to apply and pay for licensing and permits in order to operate.For example: businesses that work with food, liquor, drugs, tobacco, lodging, transportation, entertainment, and firearms.

Cactus Club Caf is a restaurant that deals with food and liquor, therefore, they must apply for licensing on both food and liquor before the restaurant can open10Other RegulationsHealth & SafetyFood and Drug Act requires extensive testingRegulations also exist for many other productsQuality ControlRegulations are put in place for products and services to meet a set standard to ensure minimum standards and consumer confidence

The Food and Drug Act is responsible for ensuring the safety, effectiveness, and quality of all new food and drug placed on the market

Some of the products include childrens clothing, furniture, toys, chemicals, automobiles, and many more. If regulations are not followed by the manufacturer of a product, failure to meet the standard could endanger both the consumer and business.

Quality Control This means that regulations have been put in place so the consumer is protected from unsafe, poor-quality products, and unethical business practices11Other RegulationsEthical Business PracticesThe principles of morality and proper conduct that people use to guide their behaviourThe Competition Act states that the following are prohibitedFalse or misleading adsAdvertising a bargain price for merchandise that is unavailable in a reasonable quantityPlacing two different prices on a product and selling it to the consumer at the higher priceBusinesses often try to get the most profit for the goods and services they sell. In some cases, businesses will mislead consumers and trick them into buying their product. This is why The Competition Act was put into place so deceptive business practices are prohibited. 12ActivityWhat is GST & PST?

How is the re-introduction of PST in 2013 going to affect BCs economy?

Assignment QuestionsList several ways in which governments control businesses? What is another product in BC that is controlled by a marketing board? Select one of the acts listed on page 104 in the blue box. Research the act and report on how it affects local business.