We’ve recently touched on topics related to earning money on the Internet, so let’s return to the matters concerning investing. In the following text, we will focus on the relationship between asset management and governing the country and look for answers to how politics affects investing? The topic seems complicated, but relax; it’s gonna be fine.
Governing the country and my wallet, i.e., how politics influences company management
A country can be compared to a company in which politicians play the board of directors’ roles and Us the employees. Each of their decisions can have a positive or negative impact on the functionality of the economy and our sense of security. This is especially true for entrepreneurs whose decisions are directly or indirectly influenced by politicians. Primary measures are frontal actions such as regulations, directives, obligations, fees, inspections, rulings, suspensions, and other decisions.
Example: My friends were once running a marketing agency. They took care of their brand, carried out orders, and Zosia took care of their documents. They did very well. In the meantime, local officials started a campaign for the so-called “tax carousel” campaign. At a certain point, the friends found themselves in the suspects’ circle and found themselves on the “VAT payers blacklist.” Without any concrete evidence, the tax authorities withheld their tax return and kept it as long as possible. Time flew, the proceedings continued, and they were not reimbursed or even given a court decision against which they could appeal. The sluggishness of the judiciary and the unsubstantiated suspicion, as a result, led to their bankruptcy. The court admitted they were right after a few years and returned the outstanding returns, but they still had to start over again.
Politicians also influence our company, indirectly, through the introduction of commercial codes, laws, tax systems, and laws covering everyone.
Example: A year ago, I was in Wellington, the capital of New Zealand, where I had the opportunity to talk to the local investors. I heard a lot about economic freedom there, but I didn’t expect this kind of liberalism. Entrepreneurs in this country do not have to deal with the growing avalanche of taxes, fees, costs, social security, taxation, regulations, and other methods to pull the last dollar out of their pockets. They aren’t treated like a milking cow so that they can develop without problems. New Zealand may be associated with a third-world country, but it’s at the forefront when it comes to economic liberalism.
Politicians’ decisions can also be used for specific purposes through lobbying. Lobbying is understood as the exerting of influence by the delegates of a given company, on the representatives of public authorities, to achieve tangible profits. How does that work?
Example: Let’s go back to my friends’ story. They tried to solve their problem through the courts, but what would happen if they used their connections? While politicians directly influence a company’s operations, they may identify business entities that are exempt from fees or dues. They can also cross out a designated company from the “VAT payers blacklist.” It’s all about giving and take. In exchange for this “help,” a politician could, for example, want a part of the company’s shareholding that would provide him with a steady income after the end of public service. You think it’s stretched? Not necessarily.
Their decisions and my assets, i.e., how politics influences investments
Just like running a business, investing requires time, knowledge, commitment, ideas, and diligence. However, our success often does not depend solely on our decisions. Just like our company, the investment market also depends on the geopolitics and decisions of politicians. With this in mind, we can investigate how political decisions affect investment.
Beginner investors usually underestimate politicians’ actions and their influence on the investment market, believing that everything depends on the action of the market’s invisible hand, decisions of managers of the largest companies, and foreign capital. Most of them do not notice that the announcements of politicians themselves often influence the decision of investors.
Manipulation of taxes and dividends is another way for politicians to interfere with the investment market. The State Treasury is the shareholder of many companies, which supports investors by paying them regular dividends. However, these costs don’t come from politicians’ pockets but the state budget. If the government considers that the amount allocated to dividends is too high, it has the right to raise taxes or impose additional fees on entrepreneurs. As a result, an investor running a business will receive his dividend, but some of this amount will have to be spent on additional payments to the state treasury. Moreover, he will have to pay back what he gets.