Business Laws and Regulation

By: Miguel Virgen (June 16, 2017)

Business laws and regulations are inevitable globally. This article will examine how uncertain sources of energy, environmental and financial policies, higher costs caused by carbon taxes, environmental considerations, financial reform and regulation, taxes, fiscal cliff crisis and Obamacare regulatory measures and their changing nature affect business in America and how to suggest coping mechanisms for businesses which strive to be successful.

The first regulatory challenge to be tackled is the financial policies and reforms in place by the U.S. government. Business decisions on investment rely not only on market dynamics but also on regulations on financial services. The Dodd-Frank financial services bill created concern for large firms. If a firm was branded ‘too big to fail’, it attracted federal scrutiny in operations. It intended to increase accountability and stabilize U.S. economy and protect consumers’ from malpractices of large financial institutions. The uncertainties in regulatory frameworks and their potential effects on the bottom-line may cause businesses to withhold investments or hold back cash speculatively waiting to see if the business environment would favor a good return on investment or drive them to export their businesses overseas to friendlier markets policy wise (Williams. R, 2010).

It is widely agreed that U.S. statutory taxes are quite high. America applies worldwide taxes on its multinational corporations which effectively brings about complications to operations as multinationals may sometimes face double taxation in foreign territories coupled with taxes from American soil. Investments are informed by many factors including effective tax rates. Costs of production in different territories result in different profits and attractiveness of the business environment (Dharmapala, D. 2016). The American tax structure is quite complex and businesses face an uphill task in compliance especially if they operate in more than one territory. High and complex taxes can easily shift investment to other markets to avoid hefty penalties for non-compliance to regulations by businesses and to cutting costs to remain competitive in the industry the business is involved in as capital always seeks higher returns. (Williams. R, 2010). The U.S. has gained notoriety in its changes or uncertainty in tax regulations like in the case of the tax cuts of the Bush-era expiring in 2010 which were not well handled and led to the fiscal cliffs two years later.

The fiscal cliffs were characterized by cuts on governmental budgetary expenditure guided by the Budget Control Act 2011. The uncertainty caused by the waiting of tax cuts to expire triggered shivers both in businesses and households disrupting the economy and businesses thus became adversely affected  (Davis, S. J. 2015).

The Affordable Health Care Act popularly known as Obamacare of the Obama administration is one of many different healthcare programs implemented by U.S. governments. President Clinton had the healthcare reform initiative while Bush had his Medicare reform initiative in 2003. These changes in healthcare mean changes in the health industry compliance from time to time and also compliance by employers or businesses. Obamacare being a campaign promise attracted heated debates both legislatively and among the electorate and raised questions of its enduring power given that Obama would soon leave office. The Trump victory and Republican majority rule of the Senate and House pose a real threat once more to U.S. healthcare stability. (Davis, S. J. 2015).

Energy and the environment are another facet that is regulated in the America. The Trump leadership has shaken the stability of the American policy framework giving executive orders, and rolling out new directions on taxes and trade including breaking down environmental regulations heightening worry among investors of the future. America has different applications of policies in different states. What is permitted in one camp might be illegal in another jurisdiction thus even doing business within the U.S. means businesses need to understand the policy directives of the states they wish to operate in making doing business quite burdensome when regulations keep changing too rapidly and unpredictably. The global push for carbon taxes and more so in some states in the U.S. also induces pressure on industries that emit carbons and the hesitance in decision making cause economic slowdown since energy companies face resistance from environmental activists on top of a loss of licenses if particular energy sources are banned from use. Politics in America affects the direction of regulations meaning there is rarely long term effects of policies whether good or bad. (Forbes, 2017)

Monetary policies in U.S. just like all the aforementioned factors previously discussed is sharply uncertain further complicating the economic landscape for businesses from one government to another and further due to the differences in state interpretation of laws (Davis, S. J. 2015). The complexities of the American monetary policies create an uphill task for businesses.

In Steven Davis, Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making, an observation of a case by a D.C. court reveals that Congress passes statutes with broad words and the ambiguity and broad language trickles down to agencies and later interpretations’, edicts come forth. Thus laws are ambiguous and complex and longer paperwork is released to give meaning to the law. Challenges reside also in the fact that these laws are made suddenly, without the participation of the public and eluding publication in the code of regulations or Federal Register. The undue law making powers laid upon agencies denies citizens or business stakeholders from putting checks and balances to ensure laws passes are not onerous.

In conclusion, businesses ought to ensure they have adequate knowledge of the vast business laws and regulations affecting the U.S. market to ensure compliance with rules and regulations. Businesses should also engage policymakers at all levels national, state et cetera to lobby for favorable and long-term policies which would mean lesser costs in compliance and in production due to the real risks accruing from changes in corporate taxation, environmental, monetary policies et cetera. Business leaders should agitate for simplification of policy directives from the Senate, House, and alternative agencies to increase opportunities for American businesses to thrive for example introduction of a flat tax for multinationals (Dharmapala, D. 2016). The areas of interest herein discussed are not only American issues but have become increasingly globally trending issues. Thus American politicians and stakeholders should not take a back seat in shaping the discussions and policies that affect world climate, energy talks or international business laws since the globalization of economies and the obvious interdependence of nations means our businesses will be either directly or indirectly affected by the decisions both at a national level and at an international level as we export or import various supplies. Businesses must remain agile to cater for the ever-changing nature of laws and regulations to ensure they remain in business by being wholly compliant. They must acquire all the necessary licenses, avoid tax evasion, meet minimum wage requirements, ensure working conditions for employees are not hazardous to their health and meet the safety requirements all the while remaining competitive in their industries and ensuring they capture their niche markets with relevant products and services.

References

Fellows, University Of Houston Energy. “Energy Policy Under The Trump Administration: Uncertainty, Opportunity and Risk.” Forbes. Forbes Magazine, 12 Apr. 2017. Web. 16 June 2017. <https://www.forbes.com/sites/uhenergy/2017/04/11/energy-policy-under-the-trump-administration-uncertainty-opportunity-and-risk>.

Williams, R. (2011). ‘‘The Impact of Regulation on Investment and The US Economy.’’ Research Summary (Mercatus Center, George Mason University.

Davis, S. J. (2015). Regulatory complexity and policy uncertainty: headwinds of our own making. Browser Download This Paper.

Dharmapala, D. (2016). The economics of corporate and business tax reform.

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