Business and government
Government Relations and Business Law
Business and Government
The relationship between government and business is difficult. Government can figure like a cooperator and also like a controller.
1. Government as cooperator, partner:
Government uses these methods for supporting the business:
Promoting economic growth – government uses monetary (money supply) policy and fiscal (taxing and spending) policy to gain the economy growth. It also tries to avoid high inflation and severe recession.
Supporting and subsidizing business – government operates programs to help business. Functions: providing information, training through agencies, providing direct loans, loan guaranties and subsidies
Maintaining the infrastructure – building roads, bridges, airports, harbors. Government provides energy for business operations; also public schools provide educated labor to companies.
Buying industry’s products – products like army uniforms or delivery trucks.
2. Government as regulator:
Government adopted laws and regulations to protect people against business’s unfair practices. There are two types of business abusive activities: activities that reduce competition and practices endangering the rest of society.
- Government regulation to protect the public:
Government takes care of free-market system and competition and also protects the rights of consumers, employees, minorities, investors and the environment through administrative agencies such as Consumer Product Safety Commission, Occupational Safety and Health Administration, Equal Employment Opportunity Commission, Securities and Exchange commission and Environmental Protection Agency.
- The move toward deregulation:
- deregulation – removal or relaxation of rules and restrictions affecting business.
Some government regulations of business are productive, but they also can increase the costs of doing business, create delays and disturb economic incentives.
- cost-benefit analysis – comparison of the costs and benefits of a particular action for the purpose of assessing its desirability. It is a very popular approach to evaluating regulations. this method is usually performed by executive agencies, but some independent agencies prefer this analysis, too.
3. Government as tax collector:
Taxes have been used for two purposes:
- to raise revenue for government
- to provide incentives or disincentives for certain types of behavior
- tax credit – amount deducted from the income on which a person or business is taxed. It was created to motivate companies to invest in capital equipment.
Taxes in Slovak Republic:
There is an even tax in SR and it is 19% high.
Taxes in SR
direct taxes indirect taxes
income taxes property taxes universal taxes selective taxes
- personal - real estate - value-added - excise tax
- corporate - transfer of real estate (VAT)
- road tax
The major taxes that affect business include those assessed to provide revenue for government – personal and corporate income taxes, property taxes and value-added taxes and those assessed to regulate and restrict certain business activities – excise taxes and customs duties.
Personal income taxes and corporate income taxes
They are paid from profits of sole proprietors and companies.
Companies and individuals who own property pay taxes on their land or buildings, etc.
Value-added taxes (VAT)
Taxes paid at each step in the distribution chain on the difference between the cost of inputs and the price obtained for outputs on that step.
Taxes intended to help control potentially harmful practices or to help pay for government services used only by certain people or businesses. Here belong fuel, tobacco, alcohol, beer, vine, etc.
Business’s influence on government
Although the members of associations are competitive, they often have common objectives when it comes to government action. That’s why they create composition:
Lobbies – groups who try to persuade legislators to vote according to the group’s interests
Political action committees (PAC) – groups formed under federal election laws to raise money for candidates. They try to donate money to politicians. Companies can solicit contribution from their employees and give it to politicians through PAC.