In Economic Action Plan 2012, the Government announced it will eliminate the penny from Canada’s coinage system.
Over time, the penny’s burden to the economy has grown relative to its value as a means of payment. It costs the Government 1.6 cents to produce each new penny. The estimated cost to the Government of supplying pennies to the economy is about $11 million a year.
Due to inflation, the penny’s purchasing power has eroded over the years. Today it retains only about one-twentieth of its original purchasing power. Given its declining purchasing value, some Canadians consider the penny more of a nuisance than a useful coin.
While the cent will remain Canada’s smallest unit for pricing goods and services, the Royal Canadian Mint will no longer distribute pennies as of Fall 2012.
The penny will retain its value indefinitely and can continue to be used in payments. However, as pennies are gradually withdrawn from circulation, price rounding on cash transactions will be required.
In removing its lowest denomination coin, Canada will follow on the successful experiences of many other countries, including Australia, Norway, Switzerland and the United Kingdom.
Canadians can redeem pennies at their financial institutions. The Government encourages Canadians to consider donating them to charities.
Consumers can continue to use pennies indefinitely.
A rounding guideline that has been adopted in other countries, and that will be adopted by the federal government for cash transactions with the Canadian public, is:
The calculation of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on purchases, whether for cash or non-cash transactions, will continue to be calculated to the penny and added to the price. It is only the total cash payment for the transaction that will be rounded.
For more information, visit: www.budget.gc.ca
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Budget measures are subject to parliamentary approval.