Most domestic companies often receive government support in form of subsidies such as grants, tax breaks, which often arise from the taxpayer money. The government gives several types of subsidies, such as export, production, employment, tax, transport subsidies. While these forms of assistance are valued for their overall effects on business productivity, production has been considered unique as they help in driving an increased supply of products and motivate competitiveness in the industry.
Production subsidies are used to giving leverage to companies producing certain levels of production, thereby enabling the product to be marketable without adding production costs to customers. This support facilitates the creation of new firms and may lead to the development of regions (Pappas et al, 1). Moreover, employment aids given by the government to businesses assist in reducing employment levels, thereby raising the individual’s standard of living and progressively that of the country.
However, these subsidies are often abused; for example, some businesses take advantage of such support to engage in fraudulent and corrupt deals. These deals make the subsidy to be inefficient hence need to make changes to improve their usefulness to the business and shield taxpayers from unnecessary burdens (Zhang et al, 121). Strict measures should be enforced to curb corruption and fraud activities and severe punishment to such companies and individuals who abuse such interventions. Additionally, proper guidelines should be effected on goods for import or export subsidies to protect small businesses in the country and encourage entrepreneurial culture. Moreover, the instructions are to be enforced to protect unsubsidized firms from unfair competition from subsidized firms in the same industry.
Pappas, Kostas, et al. “Do Government Subsidies Affect Income Smoothing?.” (2019).
Raghunandan, Aneesh. “Government subsidies and corporate fraud.” Available at SSRN 3035254 (2018).
Zhang, Huili, Ran An, and Quinlin Zhong. “Anti-corruption, government subsidies, and investment efficiency.” China Journal of Accounting Research 12.1 (2019): 113-133.