Canada kills its penny
The coins, which cost 1.6 cents apiece to make, will be gradually withdrawn from circulation this year.
By Jacqueline Thorpe, 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 1-cent coin are a $150 million drag on the economy, according to a 2006 study by Desjardins, a financial institution based in Levis, Quebec.
"Pennies take up too much space on our dressers at home," Finance Minister Jim Flaherty said in the text of his budget speech in Ottawa late last month. "They take up far too much time for small businesses trying to grow and create jobs."
Business groups welcomed the announcement, which follows similar moves by countries such as Australia, Brazil and Sweden. Economists said the phase-out would have little impact.
"If there's a rounding up, you'd see a rounding down somewhere else," said Craig Wright, the chief economist for the Royal Bank of Canada.
The savings to financial institutions alone may be about $20 million a year as banks reduce transportation, storage and handling costs, the study estimated.
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.
Withdrawn from circulation
The penny, with two maple leafs on one side and Queen Elizabeth II on the other, can continue to be used in payments. As the coins are gradually withdrawn from circulation, price rounding on cash transactions will be required, the government said.
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 taking place on the total payment.
Noncash payments on checks and credit cards will continue to be rounded to the nearest cent. (Post continues below.)
"If businesses round cash transactions to the nearest 5-cent increment, any gains or losses relating to cash transactions (a maximum of 2 cents per transaction) will balance out over time," the government said in its budget documents.
Retailers and other businesses can continue to price goods and services in 1-cent increments, and there will be no need to reprogram cash registers, according to the government.
Catherine Swift, the president and chief executive officer of the Canadian Federation of Independent Business, said the move will increase efficiency.
"It has been a long time coming," she said. "It's been a real pain more than anything else. We've actually polled our members on this, and they're supportive."
The mint used 3.3 million pounds of steel, more than 154,000 pounds of copper and 50,700 pounds of nickel last year to make pennies at its facility in Winnipeg, Manitoba. It put 1.3 billion coins in circulation in 2011, half of which were freshly minted and half made from recycled materials.
More from MSN Money:
- Are US pennies too pricey to make?
- Canada's new 'funny money'
- Why America's $1 coins haven't caught on
- How to spot counterfeit money
VIDEO ON MSN MONEY
Ok, government idiots when are we going to do the same thing. I never like a 99 cent item a dollar is easier to figure tax on anyway.
Another good idea from Canada who knows how to save a few dollars in government...
"The savings to financial institutions alone may be about $20 million a year..."
I'm sure the banks will be eager to pass this savings on to their customers!
About time the U.S. Mental Midgets started to do their math. A Galvanized washer the size of a penny Costs me 10 cents. Guess what I use for a washer ? ! I haven't purchased washers in 20 years ! I suggest that all contractors do the same and the penny would disapear in a few years.
Make the nickle out of aluminum and it would be lighter in the pocket.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON PERSONAL FINANCE
When it comes to holiday shopping, a bargain is a bargain no matter what time of year it is.