Canada Eliminates Penny that Costs Penny-and-a-Half to Make
April 2, 2012
Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million (US$11 million) annually and forcing retailers to round prices to the nearest nickel, says Bloomberg.
- The Royal Canadian Mint, which has produced 35 billion pennies since it began production in 1908, will cease distribution this fall due to the coin's low purchasing power.
- Production and handling cost for the one-cent coin are a C$150-million drag on the economy, according to a 2006 study by Desjardins, a Levis, Quebec-based financial institution.
Business groups welcomed the move, which follows other countries such as Australia, Brazil and Sweden, and economists said it would have little impact on inflation.
- The savings to financial institutions alone may be about C$20 million a year, as banks reduce transportation, storage and handling costs.
- It costs the government 1.6 cents to produce one penny, which has been made of copper-plated zinc and copper-plated steel since 1997.
- The penny can continue to be used in payments.
- As they are gradually withdrawn from circulation, price rounding on cash transactions will be required, the government says.
- The calculation of the federal goods and services tax and provincial sales taxes will continue to be calculated to the penny and added to the price, with rounding only taking place on the total payment.
- Non-cash payments on checks and credit cards will continue to be rounded to the nearest cent.
Source: Jacqueline Thorpe, "Canada Eliminates Penny Costing Penny-and-a-Half to Make," Bloomberg, March 29, 2012.
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