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1.5 Explain the effect of the political environment on organisations

Business can be affected by local, regional, national or international political circumstances which can include:

  • tax
  • laws
  • political stability

Tax

Local government levy business rates, and income tax or corporation tax will be payable to national government.  National Insurance contributions are payable by owners and staff employed by companies.  Penalties may be payable if tax is not paid or late.  International companies could be subject to different taxes in a number of countries.  Sales tax or Value Added Tax could be liable when selling goods.

Laws

There are many laws affecting businesses – Health and Safety, Disability Discrimination, National Minimum Wage, GDPR, employment rights and others.  The onus is one the business to check which laws they have to comply with.  Complying with these laws may have a financial cost.  Documentation rules could be changed for international cargo, which if they are not complied with could prevent goods being shipped.

Political Stability

Changes in the political landscape can affect business in either a positive or negative way.  A lack of stability could affect business operations, owners may be reluctant to invest or enter new markets.  Changes in other countries could affect businesses as their customers’ needs may change, shipping could be affected, component parts may become unobtainable or expensive.

Political stability improves consumer confidence and attracts investors