Canada ditches the penny

http://www.globaltvedmonton.com/money/penny+to+disappear+from+coinage+system+minting+to+end+by+fall+budget/6442610744/story.html

by codergirl • 14 years ago

238 110 14 years ago

globaltvedmonton.com

kitcar• 14 years ago

I wonder how this will affect sales taxation, as the tax rate isn't a multiple of 5 in all provinces, and hence the amount of tax collected on a purchase will have to be either be rounded down or up.

msbarnett2• 14 years ago

"If the customer has the pennies, they can use them. Payments with debit or credit cards, or cheques, can also be to the penny. But if the customer is paying cash and doesn't have the pennies, the total will go up or down to the nearest nickel."

I gather that's post application of sales tax.

mindslight• 14 years ago

Presuming a uniform distribution of price endings, existing pennies are then worth 1.43 cents (you only spend them when the price is congruent to (0.03 or 0.04) mod 0.05).

mmastrac• 14 years ago

This line-item is basically a smokescreen for cutting all sorts of other important things (like the research tax credit, SR&ED; various social programs; the budget for our national broadcaster, the CBC; and the salary of the Chief Electoral Officer):

http://www.reddit.com/r/canada/comments/rjrfn/the_budget_5_b...

Amusingly this particular cut was actually a private member proposal from the NDP (the left-most mainstream party).

dfc4• 14 years ago

I'm not very familiar with canadian politics. Why is it amusing that the NDP proposed this?

mhyee• 14 years ago

The party that implemented this is the Conservative party, the right-most mainstream party. The two parties generally don't see eye to eye, to put it lightly.

redthrowaway3• 14 years ago

This isn't the Canadian Budget; it's the budget proposed by the ruling Conservatives. This item will likely generate the most buzz and goodwill for the budget, and it was proposed by the current Opposition NDP, who are socialists.

So, the greatest PR windfall for the Conservatives will have come from their biggest ideological and political opponents. It's mildly entertaining.

That said, as the Conservatives have a majority (>50% of seats in the House of Commons), there's no chance that the budget would fail, triggering a vote of non-confidence and a general election. So it wasn't a vote that had any real importance politically, but it will serve to generate public goodwill, which they could use. The Conservatives currently only have a majority because of the ineptitude of the Liberals and Quebecers' fatigue with the Bloc Quebecois. Most Canadians are to the left of the Conservatives, have only warily entrusted them with power, and only then because the center-left liberals couldn't get their shit together at election time.

dhughes2• 14 years ago

It's difficult finding a comparison since the US only has a two-party system.

Maybe an example something like Ralph Nader suggesting something and Nixon doing it.

Or more modern George W Bush following the advice of Jon Stewart.

Anyway (the far?) right agreeing with the left is odd.

huggyface3• 14 years ago

Say that it's a "smoke screen" is needlessly partisan. It is, indeed, a line item. It deals with something that has come up for consideration since the 80s. If it gets attention, it gets attention.

But do you think no one notices the other changes because they're ditching the penny? That is preposterous.

yay_cloud• 14 years ago

It might be construed as a partisan comment, but that is exactly how politics works. After working on a few campaigns (and leaving in disgust), a politician or party will gladly pocket an easy but visible decision like this in order to "steal eyes" away from other -- less positive -- changes or events.

wisty• 14 years ago

Memo by Jo Moore, British special adviser and press officer, 2.55pm on September 11, 2001:

> It's now a very good day to get out anything we want to bury. Councillors' expenses?

It's an extremely common practice to release unpopular information, or pass unpopular bills when something else is bound to hit the front page.

dstein• 14 years ago

from reddit:

  SR&ED is [reorganized.]

Whew, so it's not completely axed. If anything Canada needs significantly more investment and tax programs like this. Brain drain has always been a problem for Canada because of the lack of investment from the government and the lack of tech-oriented VC.

mcantelon• 14 years ago

From skimming the news it seems like it's cut significantly.

>The changes include a cut in 2014 to 15 per cent from 20 per in the tax credit rate and a restriction on which expenditures count toward the credit. For example, capital expenditures – buildings, equipment and product prototypes – will no longer be eligible. The amount of eligible overhead expenses and subcontracted R&D will also be reduced.

http://www.theglobeandmail.com/report-on-business/economy/gr...

Bad news for Canada's tech innovators.

cperciva2• 14 years ago

I was hoping for SR&ED to be completely axed. It's a huge monstrosity of paperwork, to the point that small businesses pay 30% of their tax credits to consultants who fill out the forms for them and large businesses hire teams of people for the sole purpose of tracking and classifying SR&ED expenses so that the tax credits can be claimed. I suspect that Tarsnap is eligible for some SR&ED credits, but it's simply not worth the time and headaches it would cost me to claim them.

If Canada wants to encourage innovation, they should set up a system which rewards people for doing new and innovative things, not a system which rewards people for being good at filling out forms.

aoprisan2• 14 years ago

how is this even remotely a smokescreen? it will save money and lower costs for businesses in the long term.

Natsu• 14 years ago

I believe he's arguing that this is a good change that will get a lot of press. With that creating an opportunity to make a lot of bad changes while everyone is focused on this.

Not being up on Canadian politics, I won't take a position on whether or not that is correct, except that the US is in the same boat and I would like it if they would get rid of our penny.

I know there are people who say it's traditional and whatnot, but I don't see anyone clamoring to bring back two or three cent pieces.

kmm• 14 years ago

A brilliant decision. Now if we could only get rid of our 1 euro cent here.

According to some inflation figures I quickly found on the internet, a (US dollar) penny had a hundred years ago 23 times as much buying power as a penny nowadays. That means the smallest denomination was then was worth almost as much as a quarter is now! People could get by without smaller coins then and they should be able to work perfectly fine now without worthless pennies.

drostie2• 14 years ago

Move to the Netherlands. The one-euro-cent and two-euro-cent bits don't exist here unless you're doing a bank transaction; cash transactions get rounded to the nearest 5 cents.

phillco• 14 years ago

Even better: the US used to have a half-cent but they abolished it in 1857 due to its lack of value. With inflation, it's worth more than today's dime.

alasano• 14 years ago

Some would argue that your example is almost exactly as good as the other one given.

kamjam• 14 years ago

For a few years during the transition to decimalisation, the UK had a half penny also.

http://en.wikipedia.org/wiki/Halfpenny_(British_decimal_coin...

huetsch• 14 years ago

This isn't all true: The US used mills (1/1000 of a dollar) up until the 1960's.

http://en.wikipedia.org/wiki/Mill_(currency)

seanmccann• 14 years ago

If the customer has the pennies, they can use them. Payments with debit or credit cards, or cheques, can also be to the penny. But if the customer is paying cash and doesn't have the pennies, the total will go up or down to the nearest nickel. For example, $1.02 will become $1 and $1.03 will be $1.05.

Something just feels wrong about rounding. The customer would always get screwed. They should solve this problem by using the federal sales tax to round up/down. $1.25 + 5% = 5¢ of tax instead of 6.25¢.

That said, it would make sense for merchants to round down for cash purchases. It would be a tiny incentive to use cash rather than credit cards (which cost the merchant 2-4%)

dfc4• 14 years ago

That sounds like a nightmarish tax policy.

Moreover one of the best things for consumers was when the stock market changed quotes from fractions to cents.

ced2• 14 years ago

Moreover one of the best things for consumers was when the stock market changed quotes from fractions to cents.

Why?

msbarnett2• 14 years ago

> They should solve this problem by using the federal sales tax to round up/down. $1.25 + 5% = 5¢ of tax instead of 6.25¢.

Wouldn't work except in Alberta, NWT, the Yukon, and Nunavut. Anywhere else, the provincial sales tax would knock it back off a multiple of 5.

drostie2• 14 years ago

It's a round, not a ceiling function. If you were going to pay .98, .99, .00, .01, or .02 you will now pay .00; whereas if you were going to pay .03, .04, .05, .06, or .07 you will now pay .05 . In other words, after the very first interval of 5 cents (about $0 even) each numeral gets 5 incoming numbers associated with it.

The only people who could really try to steal pennies from everyone would be supermarkets, and they would face the problem that it's too broadly peaked -- people going to the supermarket will buy between two and twenty things, and modulo 5 that sum is not easy to predict or steer.

sanswork• 14 years ago

They don't have pennies in Australia and they just round up or down to the nearest 5c interval. I assume they will do the same in Canada.

waqf• 14 years ago

To be precise, that's only true if you pay in cash. Pay with plastic in Australia and you're charged by the cent.

quink• 14 years ago

> They should solve this problem by using the federal sales tax to round up/down. $1.25 + 5% = 5¢ of tax instead of 6.25¢.

I see nothing but confusion there.

$1.25 + $0.05 = $1.30. After rounding, $1.30.

$1.25 + $0.0625 = $1.3125. After rounding, $1.30.

> It would be a tiny incentive to use cash rather than credit cards (which cost the merchant 2-4%)

Dealing with cash instead of credit cards is also a similarly percentaged inconvenience - that's why they're getting rid of the penny in the first place!

vaksel• 14 years ago

i wonder if Canada has that bit, where the prices you see in the store are the final prices(i..e with tax already calculated in)

UnFleshedOne• 14 years ago

No, the prices are before tax. I think there is even a law against showing prices with tax for whatever reason.

brunoqc• 14 years ago

I thought they don't include tax so they don't have to change it every time the tax rate change.

danudey• 14 years ago

There's no law against it (some places do this, most notably street carts, etc.), but if you were a cafe owner would you really want to put 15% higher prices on your menus? People would look at the numbers and leave, rather than noticing the 'taxes included' and having to do math.

Until it's a legislated requirement (and boy do I wish it were), we're probably not going to see it very often other than with fungible cash-only vendors.

randlet• 14 years ago

"They cost more to produce than they are worth, nobody likes them, they have no commercial value."

My very first (very primitive) public facing webpage was dedicated to abolishing the Canadian penny. Good riddance!

rogerbinns2• 14 years ago

CGP Grey has an excellent youtube video on the whole issue for the US. The US currently makes 4 billion 1 cent coins annually. And they have already been abolished at US military overseas bases.

http://www.youtube.com/watch?v=y5UT04p5f7U

(Come to think of it, doesn't the US military use a lot more metric system than the general population. If so, this would be a good reason to increase the military since it would appear to be the only way progress happens!)

philwelch3• 14 years ago

The US military also uses a 24-hour clock (2000 hours instead of 8:00 PM) and consistent little-endian date formats (29 March 2012 instead of March 29 2012).

taitems2• 14 years ago

Just as a point of interest, Australia removed the 1 and 2 cent coins from circulation back in 1992. Prices have been rounded to the nearest 5 cent value when paying with cash ever since. A comment on this thread said that it's madness, but it's all someone my age has grown up with.

_frog• 14 years ago

As a fellow Australian the pennies aren't what I found most bizarre about US and Canadian currency, I more often found myself getting tripped up by the fact that listed prices in US and Canadian stores never include sales tax.

maaku2• 14 years ago

At least in the US, sales tax is assessed locally, so it can vary even within a particular region. Dealing with fixed prices and additional sales tax is the only reasonable way to run a business that crosses multiple localities.

cperciva2• 14 years ago

When Canada introduced its federal Goods and Services Tax in the early 1990s, the government wanted to have it included in advertised prices; but under Canada's constitution the regulation of business advertising is a matter of provincial jurisdiction, and the provinces didn't want to play ball.

DerekL• 14 years ago

Most stores in the US don't include sales tax in the listed price, but some do. Examples include vending machines, Starbucks and other coffee shops (but not usually locations inside book stores and supermarkets), and concession stands at concerts, sporting events, and fairs. They probably do it because they don't want to deal with pennies. Concession stands often go further and use whole dollar amounts, since the prices are high anyway.

IIRC, some post office vending machines will take pennies, because they can sell stamps one at a time.

prawn2• 14 years ago

We need to follow NZ's lead and ditch the five cent coin next. Even 10c pieces are a waste of time. Can't think of many cash transactions in my daily life where it would bother me to round to the nearest 20c. Certainly not dinner or a round of drinks, lunch, a full bag of groceries, etc.

taitems2• 14 years ago

There are several thousand, if not million of Australians that would disagree. The ability to round prices by ten or twenty cents at a time is a luxury that cannot be afforded by everyone.

Nesterov• 14 years ago

The beginning of the end.

burgerbrain• 14 years ago

...of pennies.

baltcode• 14 years ago

This is simply patching over the underlying problem - dilution in the money supply. There is no reason why countries like the US and Canada who have only become a lot wealthier in the last 200 years should have such inflation. Stop printing money, and the penny will remain valuable!

alanh• 14 years ago

Reminds me of an anecdote about a woman who balanced her checkbook by rounding all amounts to the nearest dollar. Her father eventually heard about this, freaked out, and re-tallied everything — and ended up within a dollar of her previously-computed balance.

jowiar• 14 years ago

Ridiculously simple solution: Drop the hundredths place entirely. Kill pennies, nickels, quarters, bring back $.5 pieces.

A tenth of a dollar is enough precision for any realistic transaction in the United States.

ethereal• 14 years ago

Simple in concept, difficult in execution. How would you recommend the transition between the two systems be handled?

philwelch3• 14 years ago

Stop minting pennies, nickels, and quarters; start minting 20 cent pieces and mint more 50 cent pieces; let the free market sort it out. I'm not being flippant, it would actually work, at least as far as not wasting money producing low-value coinage is concerned.

lukeholder• 14 years ago

australia did this in 1992. git rid of the 1c and 2c coins. we have 5c pieces. currently living in the US, and I cannot stand pennies.

NZ_Matt2• 14 years ago

New Zealand removed the 5c coin form circulation in 2004, leaving us with $2 ,$1 , 50, 20c and 10c coins. Electronic card transactions are charged to the nearest cent and cash transactions are rounded to the nearest 10th.

The transition was straight forward and I didn't hear any complaints.

_delirium2• 14 years ago

It works like that in Denmark as well; credit/debit transactions are charged to the full 0.01 kr precision (an absurdly small amount, about 1/10 of a eurocent), but cash transactions are rounded to the nearest 0.5 kr.

philwelch3• 14 years ago

Like dollar coins and $2 bills, 50-cent pieces never went away. People just don't spend them because they're "rare", and hence they appear to be rare.

whiskyant• 14 years ago

A simpler solution would be to just round every transaction to the nearest 5 cent, which is the scheme that most countries that drop the penny follow.

dholowiski• 14 years ago

I suspect that POS software vendors will make billions of pennies selling upgrades.

ww5202• 14 years ago

Does that mean pricing psychology would work differently? 19.99 would be out of fashion?

mahyarm2• 14 years ago

It will turn into 19.95 to keep the same psychology. Many stores already vary the last digit to mark the status of the item. Such as 97 for clearance items and so on.

aoprisan2• 14 years ago

actually, it'll be $20.00

NZ_Matt2• 14 years ago

In New Zealand our lowest denomination is 10c but retailers still use that pricing tactic. Electronic card transactions are very popular here and they are charged to the advertised price while cash transactions are simply rounded to the nearest 10th.

ww5202• 14 years ago

Is that misleading? Advertising for 19.99 but charged at the rounded up 20.00.

damncabbage• 14 years ago

"And some old adages will likely fade away, too."

Australia hasn't had pennies since the sixties and we still use phrases like "in for a penny, in for a pound."

blahedo3• 14 years ago

The US hasn't had pounds for centuries and we still use phrases like "in for a penny, in for a pound". :)

jstalin• 14 years ago

The glory of central banking.

http://coinflation.com/

meric• 14 years ago

Now is a good time to buy up all the pennies for cheap. Melt them down the day they're abolished and sell it all as scrap metal (or don't sell if you think it'll hold value like gold does).

CrystalKoo• 14 years ago

Great in a way that it costs more money to produce a penny than what it's worth.

maeon3• 14 years ago

Is the ditching of the penny an alarming event like the addition of a zero on the largest denomination of currency? Why do I work hard to exchange my labor for money that is being inflated on purpose?

Egregore• 14 years ago

To exchange that money for goods. To invest those money into something that will bring you more money back.

Canada ditches the penny

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