Today more than ever in Canada, the government has a significant impact on national markets through the taxes that they impose, the implementation of both price ceilings and price floors, and also through production quotas placed in certain industries. There are other factors that also allow the government to influence the markets, however the aforementioned ones are by far the most influential and the most important to delve into. A market is essentially anywhere that a good or service can be exchanged between both a buyer and a seller at a price agreed upon by both parties. A typical example of a market would be the stock market, where stockbrokers buy and sell shares of companies at prices upon which both parties agree. However, even a local general store is a form of market as well. With that being said, it is easy to begin thinking about all the ways the government influences each and every kind of market; theres thousands of different ways. Something as simple as a duty being placed on a certain product can cause waves of change in certain markets. In effect, any change the government imposes in a market will have drastic consequences, which is why they have such an influence over our national markets more than any other financial entity ever can. With all of this in mind, it is a good idea to take a look at one of the most effective forms of influence the government uses, taxation.

The governments influence on markets through taxation is strong due to its policies on the taxation of goods and services as well as income. Taxation is used to maximize the welfare of the population, as the capital gains achieved by the government are typically retained and recycled back into society through forms of social services, for the betterment of its constituents. That is a benefit of government intervention in national markets, however their range of influence through taxation is much greater than just the betterment of the population; taxation affects business decisions, market trends and many other aspects, as we will see. The simplest form of taxation is the GST, which is the Goods and Service Tax, imposed by Mulroneys Conservative government in 1991. The GST is a tax added on to the purchase price of just about every product imaginable, except for certain products and services deemed as essential such as groceries, residential rent, and medical services, and services such as financial services. However the latter are also taxed in some form or another by the government, although not necessarily by the GST. The creation of the GST influences Canadian markets in a big way; many economists claim that since the inception of the GST in 1991, the Canadian underground economy has seen a sizeable increase in activity. This is due to the fact that with the GST, the consumer ends up paying a higher than retail price for their goods, which leads many of them to simply turn to the black or grey markets, where they can purchase their goods and not owe a single penny to the government. Not only that, but the GST imposed by the government may also have an effect on consumer spending in general. Not every consumer will turn to undergro...

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