Update: see previous posts – June 30, 2012 The Loonie’s Celebrates Its’ 25th Birthday on June 30, 2012, March 30, 2012 A Penny for your Thoughts!, March 15, 2012 Never Iron the Canadian Polymer $100 Banknote – Ironing Both Shrinks and Shrivels the $100 Banknote, November 14, 2011 $100 Polymer Bill (A Robbie Borden) Released on November 14, 2011, October 9, 2011 New Canadian Plastic Bank Notes To Be Released in Nov./11, March /12 and the End of 2013
Phasing out the Penny
In Economic Action Plan 2012, the Government announced it would phase out the penny from Canada’s coinage system. The decision to phase out the penny was due to its excessive and rising cost of production relative to face value, the increased accumulation of pennies by Canadians in their households, environmental considerations, and the significant handling costs the penny imposes on retailers, financial institutions and the economy in general.
The estimated savings for taxpayers from phasing out the penny is $11 million a year.
The cent will remain Canada’s smallest unit for pricing goods and services. This will have no impact on payments made by cheque or electronic transactions—only cash transactions will be affected. Moreover, pennies can still be used in cash transactions indefinitely with businesses that choose to accept them.
To help consumers, businesses, charities and financial institutions to plan, a transition date of February 4, 2013 has been set after which the Royal Canadian Mint will no longer distribute pennies.
On this date, businesses will be encouraged to begin rounding cash transactions.
As pennies exit circulation, cash payments or transactions only will need to be rounded, either up or down, to the nearest five-cent increment.
The Government of Canada will be adopting a rounding guideline that has been used successfully by other countries for its cash transactions with the public.
Under this guideline, when pennies are not available, cash transactions will be rounded in a fair and transparent manner, as illustrated below:
When to round
Again, only cash transactions require rounding. Cheques and transactions using electronic payments—debit, credit and payments cards—do not need to be rounded, because they can be settled electronically to the exact amount.
For any cash payment, only the final amount (or equivalently, the change owed) should be subject to rounding. Individual items, as well as any duties, fees or taxes, should be tabulated in their exact amount prior to rounding, as illustrated:
*A tax rate of 5 per cent has been provided for the purposes of illustration. Any taxes (e.g., the Goods and Services Tax/Harmonized Sales Tax), as well as any fees or duties, should be tabulated prior to rounding.
Are you ready, as a consumer, for the total elimination of the penny, as it is phased in beginning February 4, 2013?