The federal government’s just-announced budget will eliminate the penny, arguing that the coin has become an economic burden to the country and a nuisance to consumers.
The government currently spends 1.6 cents to produce each new penny, for a cost of approximately $11 million a year.
The coin’s value has eroded to approximately 1/20th of its one-time value.
In its budget documents, the government has announced that the Royal Canadian Mint will no longer distribute pennies as of fall 2012, consumers will be able to use the coin indefinitely.
The elimination of the penny will affect only cash transactions – all non-cash transactions will continue to be settled to the cent.
For cash transactions, the final after-tax total will be rounded to the nearest five-cent increment.
The government has stated that businesses will not need to update their cash registers for rounding, as prices and the final total payment will still be set at one-cent increments. The government is encouraging businesses to continue to accept the coin as a means of payment.
“The Government expects that businesses will apply rounding for cash transactions in a fair and transparent manner,” states the budget plan, tabled in the House of Commons by finance minister James Flaherty. “Canadians will be able to redeem pennies for full value.”
According to the government, the removal of one-cent coins in other countries, such as New Zealand and Australia, did not cause an increase in prices.
Canada will eventually join New Zealand, Australia, Norway, Finland and Sweden among penny-free economies.
