These costs include the losses of consumer surplus because of higher prices and the resulting deadweight losses as import volume is reduced, lost economies of scale as opportunities for further trade are foregone, and the loss of incentives for technological development because of the pressure of import competition (Carbaugh, 2009). So if the government realizes that the cost of protectionist policies are going to increase the cost to society, the more likely that the policies would not be implemented. This is another disadvantage that the protectionism could cause to society, compared to free trade. Moreover, the industry which uses imported materials for production also have to pay more because of the implemented tariffs. That is why the cost to manufacture a product increase.
2. Taxes on goods and services can rise prices artificially and distort the efficient operation of the market. In addition taxes on income can create a disincentives effect and discourage individuals from working hard. 3. Government can also fix prices, such as minimum and maximum prices, but this can create distortion which leads to; - Shortages, which may arises when government fixes prices blow the market rates because public health care is provided
This can be achieved by providing a conducive environment that provides incentives to work, promotes risk taking and inculcates a culture of saving. The path towards an optimal tax system is littered with trade-offs and in cannot therefore be viewed in isolation. The impact of fiscal policy is more potent when it is implemented in conjunction with monetary policy. Several theories on how income taxes affect work effort, risk taking and saving have been development but the collection of empirical evidence to support these theories has lagged somewhat. Below are some of the reasons why conclusions have been difficult to draw.
Thus, other theories have tried to explain why FDI might not have a significant, positive effect on growth. Some stress the importance of host-country characteristics in allowing the impact/benefits of FDI to be felt; Blomstrom et al (1992) emphasize sufficient income, while Borensztein et al (1998) emphasize sufficient human capital, for example. Another argument posits that the entry of foreign firms could harm host economies if the foreign firms completely push out domestic firms from the market. Furthermore, as Nunnenkamp and Spatz (2003) explain, different types of FDI might have different impacts on growth. If a host country primarily receives resource-seeking FDI, then the extractive/enclave-like nature of such investment might hamper its ability to generate positive spillovers for the host economy.
Moreover, lower tax revenues are likely to have a negative impact on the willingness of Member States to increase or maintain their contributions to the EU. The incentives on tax havens elimination require resources that could otherwise be used on development of economic activity and other facilities. In fact, as the result of tax havens practices and based on the author experience, nowadays large corporation even more often use transfer pricing schemes that gives a significant advantage over smaller companies, and this ruins EU efforts to develop the small and medium business
If taxes are too tight, businesses can become cumbersome. In the Philippines were there are areas of good political handling vs. bad ones like in how the government renders services, it would determine which area they would want to be. Foreign investors who go to
However, taking risks can also be a success for the firms but also a big failure and even to crush the economy of the country in some industries such as pharmaceutical and petrol. Before entering into a country, firms must do a research and test the economic environment of the country and then choose the entry mode, joint venture or acquisition. Joint ventures are chosen, when there are many cultural differences and undesired asset of the firm is hard to split. The acquisition should be chosen by the firms that have enough experience in foreign markets and think that they can accomplish the aim of foreign
Countries with strong international trade have become prosperous and have the power to control the world economy. Theorists have long established the benefit that individuals, companies and countries will have with comparative advantage over goods produced as long as these are produced with differing relative cost. The net benefits from such activity are called gains from trade. This is one of the most important concepts in international trade. There are discussion if the world economy is controlled by a few transnational corporations like Toyota Motor Corporation, Apple Computer Inc., Microsoft Corporations etc., and the companies seek only to maximize profit with little or no disregard to development needs of the population and if this exacerbates the inequalities between the developed countries and the rest of the world.
But high and rising debt imposes a serious threat to the economic stability it acts a big hurdle to investment and growth and thus to generation of new employment oppurtunities . as the size of external debt increases the growing uncertainity also grows about the policies of government that it will take in order to meet its debt services obligations Also if the external debt is not properly managed it will be discouragement to foreign investment because it creates a high risk environment for doing business in the