| For the past two or three decades, determining the | | | | interests of the citizens. It may exist in countries, where |
| role of the government in business cycle has perhaps | | | | the expenditures of the government are not very high |
| been the central political and economic issue in industrial | | | | and consequently it need not to collect high taxes or |
| democracies. Although the number of nationalized | | | | the government has other sources of income, such as |
| industries is steadily declining in most parts of the world, | | | | profitable business activities. Or the police of the state |
| people with left-wing views still generally believe that | | | | is to give more freedom to business to make the |
| the government has an essential role to play in | | | | economic situation better. But some governmnents |
| providing the economic infrastructure (public transport, | | | | have insufficient money to finance it’s expenditures |
| telecommunications, and so on) and ensuring the | | | | and they increase tax rates as an alternative of |
| provision of services such as education, health care, | | | | borrowing money. Or they may limit unnecessary |
| social security and perhaps housing, and regulating | | | | business activities. This of course decreases incentive |
| working conditions, health and safety standards, and so | | | | to work, because profits become very small.amd |
| on. People with right-wing views, on the contrary, | | | | many businessmen try to hide their incomes. There are |
| generally argue that many (or most, or maybe all) of | | | | lots of methods, both legal and illegal, to hide profits |
| these activities can be left to private enterprise and | | | | from taxation. For example, tax avoidance (reducing |
| the market system, and that the role of the | | | | the amount of tax you pay to a legal minimum) or tax |
| government should perhaps be restricted to activities | | | | evasion (making false declaration to tax authorities). |
| such as defense, the police, and the justice system. | | | | The higher the tax rates, the more people are tempted |
| They argue that too much regulation is bad for | | | | to cheat, but there is ? substantial «black» or |
| business, and leads to inefficiency. | | | | «underground» economy nearly everywhere. In |
| Foe example if we look at the role of the Department | | | | Italy, for example, self-employed people - whose |
| of Trade and Industry which is under the jurisdiction of | | | | income is more difficult to control than that of |
| the British government, we’ll see the following | | | | company employees - account for more than half of |
| picture. The key areas of DTA involvement are | | | | national income. Lots of people also have undeclared, |
| developing of trade, investments and export, | | | | part-time evening jobs (some people call this |
| developing of industry inside the UK, and regulating or | | | | «moonlighting») with small and medium-sized family |
| ensuring open, competing markets, mergers and | | | | firms, on which no one pays any tax or national |
| monopoly policy. And the main focus of DTI’s work | | | | insurance. At the end of 1986, the Director of the Italian |
| at the moment is to provide detailed analysis of the | | | | National Institute of Statistics calculated the size of the |
| markets, the priority markets that Britain is aiming fir, for | | | | underground economy, and added 16.7% to Italy's |
| service of industry, and then help, particularly for the | | | | gross national product (GNP) figure, and then claimed |
| small and medium sized companies, to tackle those | | | | that Italy had overtaken Britain to become the |
| markets in an efficient way. The specific help is that | | | | world’s fifth largest economy. |
| each priority market, there are 80 of them around the | | | | To reduce income tax liability, some employers give |
| world, have a desk officer who’s wholly | | | | highly-paid employees lots of «perks» (short for |
| responsible for providing information about that | | | | perquisites) instead of taxable money, such as |
| country, detailed economic and political description of | | | | company cars, free health insurance, and subsidized |
| the market, sector information on whatever interest | | | | lunches. Legal ways of avoiding tax, such as these, |
| you. And then beyond that they can give you the help | | | | are known as loopholes in tax laws. Life insurance |
| of the embassy of that country. | | | | policies, pension plans and other investments by which |
| Besides that kind of help, government can be of help in | | | | individuals can postpone the payment of tax, are |
| other areas. One well-known American economist J.K. | | | | known as tax shelters. Donations to charities can be |
| Galbraith tried to describe responsibilities of the state | | | | subtracted from the income on which tax is calculated. |
| as he sees it. First of all, in no country does the market | | | | Companies have ? variety of ways of avoiding tax on |
| system provide good low-cost housing. This is a | | | | profits. They can bring forward capital expenditure (on |
| matter of prime importance and must everywhere be | | | | new factories, machines, and so on) so that at the end |
| a public responsibility, because badly-housed or | | | | of the year all the profits have been used up; this is |
| homeless people are visibly at odds with the good | | | | known as making ? tax loss. Multinational companies |
| society. | | | | often set up their head offices in countries such as |
| Health care is also a public responsibility in all civilized | | | | Liechtenstein, Monaco, the Cayman Islands, and the |
| lands as well as many other essential functions – | | | | Bahamas, where taxes are low; such countries are |
| parks and recreational facilities, police, libraries, the arts. | | | | known as tax havens. Criminal organizations, |
| All those are more needed by the underclass than by | | | | meanwhile, tend to pass money through ? series of |
| the affluent. Those who attack the services of the | | | | companies in very complicated transactions in order to |
| state are usually those who can afford to provide | | | | disguise its origin from tax inspectors - and the ??li??; |
| similar services for themselves. | | | | this is known as laundering money. |
| In the good society it also must be attention to science, | | | | Business ethics |
| including medical research. The market system invests | | | | In the 1920s, many large American corporations began, |
| for relatively short-run return. Therefore to support | | | | on a wide scale, to establish pension funds, employees |
| science is the responsibility of the state. | | | | stock ownership, life insurance schemes, |
| But all above mentioned information doesn’t mean | | | | unemployment compensation funds, limitations on |
| that everyone share this opinion. According to another | | | | working hours, and high wages. They built houses, |
| well-known economist R.Friedman, the role of | | | | churches, schools and libraries, provided medical and |
| government as it is now has greatly limited our human | | | | legal services, and gave money to charities. Since this |
| freedom. According to his words the limitations | | | | is fairly surprising behavior for business corporations, |
| imposed on our economic freedom threaten to bring | | | | there must be a good explanation. And I guess we |
| two centuries of economic progress to an end. | | | | have it. |
| I’ll try to explain this point of view. An essential part | | | | First of all I’d like to mention that such words as |
| of economic freedom is freedom to choose how to | | | | “ethic” or “culture” used to be considered |
| use our income: how much to spend on ourselves and | | | | as having less in common with business. But it’s not |
| on what items; how much to save and in what form; | | | | so. Nowadays the positive image of an entrepreneur is |
| how much to give away and to whom. Currently, more | | | | essential part of any businessman, necessary for |
| than 40% of our income is disposed of on our behalf | | | | success in business. And hopefully this image isn’t |
| by government at federal, state and local levels | | | | just showing-off. |
| combined. | | | | Business and moral values are connected much closer |
| As consumers we are not even free to choose how | | | | than it might seem at first sight. Business undertakings |
| to spend that part of out income that is left after | | | | include dealing with people, creating different contacts, |
| taxes as there are a lot of restrictions on buying or | | | | and as you know contacts with people are usually built |
| consuming some goods – for instance cars without | | | | upon the basis of trust. You don’t need to cheat to |
| seat belts. | | | | get profit. It is usually the result of situation when |
| And freedom to use the resources we possess in | | | | market price exceeds expenditures. |
| accordance with our own values – freedom to | | | | Though many examples of concluding a bargain on |
| entry any occupation, engage in any business | | | | parole testify to the fact that promise given by the |
| enterprise, buy from or sell to anyone else - all these | | | | person you trust sometime more valued than money |
| are regulated by the state. Today you are not free to | | | | given by somebody else. |
| offer your services as a lawyer, a dentist, for example, | | | | Cheating, compromises with one's conscience are |
| without getting first a permit or licence from a | | | | witnesses of immaturity of market relations, ignorance |
| government official. You are not free to work | | | | of businessmen. It seems to be quite logical, but many |
| overtime at terms mutually agreeable to you and your | | | | people running their own businesses forget about this |
| employer, unless the terms conform to rules and | | | | elementary truism – unfair business has no future. |
| regulations laid down by a government official. | | | | Once betrayed, a person won’t trust you or even |
| So it was another opinion, contrary to the first one. | | | | start to play this game himself. |
| Both of them are quite logical and have right for | | | | So to make a conclusion of the all above mentioned |
| existence. Maybe we should combine them | | | | I’d rather say that a company, any business has |
| somehow to create an ideal system suitable for | | | | responsibilities to its suppliers, its customers, its |
| everyone? | | | | employees, the local community and society in general |
| TAXATION | | | | as well as to its shareholders. It will provide profit in the |
| A tax is a payment of money legally demanded by a | | | | way of fair bargains with partners, loyalty of workers, |
| government authority to meet public expenses. | | | | better environment, etc. Consequently large |
| Everyone knows that taxation is necessary in ? | | | | corporations introduced ‘welfare capitalism’ as |
| modern state: without it, it would not be possible to pay | | | | a way of creating favorable public opinion. Even |
| the soldiers and policemen who protect us; nor the | | | | rational capitalists, starting with Henry Ford, realized |
| workers in government offices who look after our | | | | that a better paid work force would be more loyal, and |
| health, our food, our water, and all the other things that | | | | would be able to buy more goods and services, and |
| we cannot do for ourselves, nor also the ministers and | | | | that a better educated work force would be more |
| members of parliament who govern the country for | | | | efficient one. |
| us. By means of taxation we pay for things that we | | | | Of course, pure free market theorists disapprove of |
| need just as much as we need somewhere to live | | | | welfare capitalism and all actions inspired by ‘social |
| and something to eat. | | | | responsibility’ rather than the attempt to maximize |
| But though everyone knows that taxation is | | | | profit. Since the benefits of such initiatives are not |
| necessary, different people have different ideas about | | | | visible, Milton Friedman criticized them for being |
| how taxation should be arranged. There are two main | | | | unbisinesslike and for threatening the survival not only |
| ways, by which taxes may be paid: | | | | of individual corporations but also the general vitality of |
| 1) each person have to ??? ? certain amount of | | | | capitalism. In newspaper article titled ‘The social |
| money to the government each year; | | | | responsibility of business is to increase its profits’ |
| 2) there is ? tax on things that people buy and sell. | | | | he argued that responsibility of any company is to |
| In most countries, ? direct tax on persons, which is | | | | conduct the business in accordance with their desires, |
| called income tax exists. It is arranged in such ? way, | | | | which generally will be to make as much money as |
| that the poorest people ??? nothing, and the | | | | possible, while of course conforming to the basic |
| percentage of tax grows greater as the taxpayer's | | | | rules of the society, both those embodied in laws and |
| income grows. | | | | those embodied in ethical custom. |
| But countries with direct taxation nearly always have | | | | Thus executives should not make expenditures on |
| indirect taxation, too. Many things imported into the | | | | reducing pollution beyond the mount that is required by |
| country have to pay taxes or "duties". Of course, it is | | | | law or that is in the best interest of the firm. Nor should |
| the men and women who buy these imported things in | | | | they deliberately hire less-qualified, long-term |
| the shops who really have to pay the duties, in the | | | | unemployed workers, or workers from ethnic minorities |
| form of higher prices. In some countries, too, there is ? | | | | suffering from discrimination. To do is to be guilty of |
| tax on things sold in the shops. If the most necessary | | | | spending the stockholders’ (or the customers’ |
| things are taxed, ? lot of money is collected, but the | | | | or the employees’, whatever) money. Friedman |
| poor people suffer most. If unnecessary things like | | | | does not consider the possibility that stockholders |
| jewels and fur coats are taxed less money is | | | | might prefer to receive lower dividends but live in a |
| obtained, but the tax is fairer, as the rich pay it. | | | | society with less pollution or less unemployment and |
| Probably, this last kind of indirect tax together with a | | | | fewer social problems. |
| direct tax on income which is low for the poor and high | | | | An alternative view to the stockholder model |
| for the rich is the best arrangement. | | | | exemplified by Friedman’s article is a stakeholder |
| The primary function of taxation is, of course, to raise | | | | model, outlined, for example, in John Kenneth |
| revenue to finance government expenditure, but taxes | | | | Galbraith’s book, The New Industrial State. |
| can also have other purposes. Indirect excise duties, | | | | According to this approach, business managers have |
| for example, can be designed to dissuade people from | | | | responsibilities to all the groups of people with a stake |
| smoking, drinking alcohol, and so on. Governments can | | | | in or an interest in or a claim on the firm. A firm which |
| also encourage capital investment by permitting | | | | is managed for the benefits of all its shareholders, will |
| various methods of accelerated depreciation | | | | not, for example, pollute the area around its factories, |
| accounting that allow companies to deduct more of | | | | or close down a factory employing several hundred |
| the cost of investments from their profits, and | | | | people in a small town with no other significant |
| consequently reduce their tax bills. | | | | employers, and relocate production elsewhere in order |
| There is always ? lot of debate as to the fairness of | | | | to make small financial savings. Proponents of the |
| tax systems. Business profits, for example, are | | | | stakeholder approach suggest that suppliers, |
| generally taxed twice: companies pay tax on their | | | | customers, employees and member of the local |
| profits (corporation tax in Britain, income tax in the | | | | community should be strongly represented on a |
| USA), and shareholders pay income tax on dividends. | | | | company’s board of directors. |
| Income taxes in most countries are progressive, and | | | | Another aspect of business ethic I’d like to cover |
| are one of the ways in which governments can | | | | concerns the difference between legitimacy of some |
| redistribute wealth. The problem with progressive | | | | actions and their relevance, conformation to the basic |
| taxes is that the marginal rate - the tax people pay on | | | | rules of society. Sometimes some actions we do are |
| any additional income - is always high, which is | | | | wide-spread but it does not mean they are legal. For |
| generally ? disincentive to both working and investing. | | | | instance industrial espoinage or bribing corrupt officials, |
| On the other hand, most sales taxes are slightly | | | | telling only half the truth in advertisements and keeping |
| regressive, because poorer people need to spend ? | | | | quiet about bad aspects of a product. Lobbing, I mean |
| larger proportion of their income on consumption than | | | | trying to persuade politicians to pass laws favorable to |
| the rich. | | | | your particular industry, is legal, but can be condemned |
| In many countries taxes are quite fair and do not harm | | | | by public opinion. |