Ottawa stops making cents
Nation will save $11M a year when mint ends production in fall
OTTAWA— The penny buys almost nothing, costs too much to produce and takes up too much space in the sock drawers of the nation.
So, the federal government is finally getting rid of the copper-plated coins bedecked with maple leaves. But Canadians will still be able to use the coins for as long as they carry them around.
The Royal Canadian Mint in Winnipeg will save the federal government about $11 million a year when it stops making pennies this fall, a bright and shiny announcement in a federal budget that otherwise contained sobering news.
“The penny is a currency without any currency in Canada,” Finance Minister Jim Flaherty told reporters Thursday, adding it costs 1.6 cents to produce the one-cent coins. “So, I say to everyone, all of you here: free your pennies from their prisons at home and those jars they’re in and give them to charity.”
The smallest unit of Canadian currency will remain one cent for the foreseeable future, so there will be rules to remember when it comes to paying for purchases in cash.
If a shopper has pennies on hand, then it will be business as usual.
That coffee costing $1.64 — after tax — can still be bought by handing over a loonie, two quarters, a dime and four pennies.
Penniless purchasers, however, will see their items rounded up or down to the nearest five-cent increment “in a fair and transparent manner” if they pay with cash.
That means that anything that costs $1.01 or $1.02 will be rounded down to $1.
Anything that costs $1.06 or $1.07 will also be rounded down, to $1.05.
Something that costs $1.03 or $1.04 will be rounded up to $1.05 and anything costing $1.08 or $1.09 will be rounded up to $1.10.
Countries including New Zealand, Australia, the Netherlands, Norway, Finland and Sweden went penny-free without public outcry or any noticeable effect on inflation, the government argued in the budget document.
“Any impact on inflation would be insignificant and more likely nonexistent,” Pierre Duguay, who was then deputy governor of the Bank of Canada, told a Senate committee studying the possible disappearance of the penny in May 2010. “On some transactions, the merchant loses and the consumer wins; on some, the merchant wins and the consumer loses. However, on balance it evens out.” New Democrat MP Pat Martin (Winnipeg Centre), who has long called for the penny’s death, already had a new target in his sights.
“We don’t need the nickel either!”
Finance minister urges Canadians to ‘free your pennies from their prisons at home and those jars they’re in and give them to charity’
Martin posted to Twitter on Thursday afternoon. “Our lowest coin should be the 10-cent piece.”
It is important to remember that the rounding up or down will only happen on the final total on the bill, after the calculation of the GST or HST, which means businesses should not start rounding prices on individual items.
So, if someone buys a coffee for $1.50 and a sandwich for $2.80 — an actual example provided in a government pamphlet, which says something about what federal offi- cials know about the price of a sandwich — in Ontario, the final total after 13 per cent HST will be $4.86. That is the number that would be rounded down if the customer does not have exact change. There will be no rounding or any other changes to transactions using cheques, credit or debit cards, and businesses will not have to update their cash registers. Withdrawing the penny from circulation is expected to result in a higher demand for nickels, dimes and quarters, which is good for gov- ernment coffers because those coins are actually worth a bit more than they cost to produce. The government will also start making loonies and toonies with plated steel cores, rather than metal alloys, which cuts down on production costs for those coins, too. Businesses will be asked to bring leftover pennies to banks, which will ship them to the Winnipeg mint to be melted down and recycled. Charities are encouraged to take advantage of the news by fundraising through penny drives.