ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
A government announces that it will cut corporation tax for manufacturers and increase subsidies for renewable energy equipment. In a PESTEL analysis, under which heading would a business primarily record these announcements?
The announcements belong under the Political heading of PESTEL. Tax rates and subsidies are direct government policy decisions. Economic factors relate to wider conditions such as inflation, interest rates and exchange rates, so they are not the main category for these policy announcements.
- APoliticalCorrect
- BEconomic
- CSocial
- DTechnological
Explanation
Government policy on taxation, subsidies and similar interventions is a political factor. Economic factors cover items such as interest rates, inflation and exchange rates, which are outcomes in the wider economy rather than direct government policy decisions. Technological factors concern innovation, not state support.
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