Changing times: Canadian Mint to stop distributing the penny
- Details
- Published on Thursday, January 24, 2013
By: Kate Jackman-Atkinson
myWestman.ca
Last spring, the federal government announced it would phase out the penny from Canada’s coinage system. These changes will come into effect within the next month; after Feb. 4, the Royal Canadian Mint will no longer distribute pennies.
The government said that 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.
While the penny coin will be phased out, the cent will remain Canada’s smallest unit for pricing goods and services. This means that the changes will have no impact on payments made by cheque or electronic transactions, only cash transactions will be affected. Additionally, pennies will retain their value and can still be used in cash transactions indefinitely with any businesses that choose to accept them.
As pennies exit circulation, only cash payments will need to be rounded, either up or down, to the nearest five-cent increment. The Mint is pushing that a fair and transparent rounding guideline be adopted in Canada, the one which has been used successfully by other countries such as Australia and New Zealand. Under this guideline, only the final amount (or the change owed) will be subject to rounding.
Individual items, as well as any duties, fees or taxes, should be tabulated in their exact amount prior to rounding. Taxes, such as GST and PST, will be calculated as they were prior to the phasing out of the penny.
Payments made using non-cash methods such as cheques and electronic payments—debit, credit and other payments cards such as gift cards and prepaid credit cards—do not need to be rounded, because they can be settled electronically to the exact amount.
They should be calculated in the same manner as before.
It will be up to individual businesses to decide if they wish to continue accepting pennies, provide change for pennies or update their cash registers for rounding.
Businesses and individuals can continue to deposit pennies at their financial institutions however, some financial institutions may require large amounts of pennies to be rolled or wrapped for deposit.
