Monday, August 13, 2012

Taxes and Fees Companies Forward to Customers

Profit Maximization Strategies
In the name of making maximum profits, companies devise and deploy numerous strategies. The commonly used are massive marketing and advertising, investing in impressive branding to "lure" clients, selling as much at a low price but overall utilizing the philosophy of keeping costs of production as low as possible. Whether the company is in service or product business, the same concepts apply.

Taxes, Fines and Legal fees
Its obvious, businesses  incur an enlisted number of costs which include fixed costs (salaries, rent and administration), cost of goods sold (costs of production), marginal costs (expansion capital) among others. Companies and Businesses break even and make profits  after mastering the equation and formula of registering costs/expenses that are lower than the profits/incomes. 

A key cost that businesses are supposed to incur and remit to governments are taxes, fees and fines. Without rationalizing, companies have "hidden" these obligatory costs within the price tag that the final consumers part with at the counter. Shouldn't companies incur some or part of these taxes instead of transferring them to the customers? As a result, when taxes and fees change so do the price of consumable commodities however there are other forces that may cause a drastic price change on a product or service. When price changes becomes more frequent, rapid and aggressive the phenomena would or could be referred to as inflation. Inflation also occurs when there is too little to purchase (supply) by too many buyers (demand), business would rather stay in operation on less stock by hiking prices

Central Bank Rates and Loan Interest Rates
Central Banks in different countries do regulate inflationary tendencies by reducing the money in circulation through an adjustment (decrease, maintaining or increase) the rate at which Commercial Banks borrow from Central Banks also called the "Central Bank Rate". Since Commercial Banks are outlets through which citizens access monies to circulate, Commercial Banks inturn increase the rate at which they lend to individuals thus reducing the power to purchase that individual may have. This is another form of transfer of fees/charges to the final consumer.

Recently, Bank of Uganda announced a massive reduction of the CBR to a record tune of 17%. Unfortunately, no commercial bank in Uganda has followed suit to spare Ugandans another transfer of a high cost of accessing a loan facility.

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