2.1: The Role of the Government in Canadian Business

Canada’s system of government is based on the British parliamentary model and is quite distinct from the presidential system operating in the United States. Canada’s legislative and executive jurisdiction is constitutionally divided between the federal government and the ten provincial governments. A business may be regulated at three levels: federal, provincial, and municipal. A business may also be affected by the policies and decisions of regulatory and administrative bodies and tribunals.

The government influences business activity through the roles it plays. Some of these include the following:

• The government becomes a regulator when it controls many aspects of business activity through administrative boards, tribunals, and commissions. Regulations promote competition between businesses, protect consumers, achieve social goals, and protect the environment. For example, the Canadian Food Inspection Agency regulates dairy, egg, fish, and other food products.
• The government becomes a provider of incentives when it offers programs that help stimulate economic development. For example, the government offers funding for waste diversion initiatives, rebates for solar heating installations, and in some provinces, tax credits for employers who hire university and college students enrolled in co-operative education programs.
• The government becomes a provider of essential services when it supplies services that create stability and encourage business activity, such as law enforcement (police) and health care (hospitals).
• The government becomes a taxation agent when taxes are imposed and collected by the three levels of government.  For example, the federal government collects income tax through the Canada Revenue Agency (CRA), the provincial government collects sales tax and receives a share of income tax, and the municipal government collects property tax.
• The government becomes a customer when it buys from businesses. The Government of Canada buys many kinds of products and services, from aircraft to paper clips, from training services to scientific research.^[1]
• Government becomes a competitor when it competes with businesses through its Crown corporations, such as Canada Post, the Canadian Broadcasting Corporation (CBC), SaskTel, SaskEnergy, BC Hydro, and the Liquor Control Board of Ontario (LCBO).