Pennies don’t make sense, people agree

Hey there, time traveller!
This article was published 07/04/2012 (4961 days ago), so information in it may no longer be current.

The penny is on the fast track to the nostalgia circuit and there are not many out there who are sorry to see it go.

It’s a rare event when consumer groups, retailers and partisans of every political stripe all seem to agree with a fairly dramatic federal government decision — to remove the penny from circulation by this fall.

“No one will miss them,” said Todd Hirsch, an economist with ATB Financial in Edmonton. “It’s the kind of thing grandchildren will ask about and look at with curiosity.”

There are still some scheduling issues to be determined and the government is soliciting public comment and input until May 31, but the penny may soon become as weird a concept as a $2 bill.

Since the government loses 60 per cent on the production cost of every penny, there is no argument about the cost-savings benefit.

And when it comes to the actual users — both consumers and retailers — the feeling is generally “good riddance.”

“Our members are very supportive of getting rid of the penny,” said Marilyn Braun-Pollon, vice-president, Prairie and agribusiness for the Canadian Federation of Independent Business. “Unfortunately, they have become more of a pain than they are worth. Pennies just don’t make sense anymore.”

Ottawa has published guidelines on how retailers should round final prices up and down. The general belief is the net impact on prices will end up being a wash.

Hirsch said he doesn’t believe retailers will gouge, for competitive reasons if nothing else. And he’s confident a standardized system of rounding off to the nearest nickel will be established — rounding down from $1.01 or $1.02 to $1 and $1.06 and $1.07 to $1.05 and rounding up from $1.03 and $1.04 to $1.05 and $1.08 and $1.09 to $1.10.

“Retailers don’t even want to touch pennies,” Hirsch said. “More and more of them have a take-a-penny-leave-a-penny dish.”

While there may not be any love lost when it comes to handling the lowly copper-coloured coinage, retailers are still very concerned with the bottom line — down to the last cent.

Margo Smith, one of the proprietors of Hull’s Family Bookstores, will appreciate not having to fiddle with pennies at the till.

“It’s an understandable evolution with the currency,” she said. “It does make sense.”

But she is a little uncertain about what’s expected of her.

“Is the government going to require us to remove pennies from the cash drawer, even if they are still in circulation?” she wondered. “That would be unfortunate. We should be allowed to have them for as long as they’re in circulation.”

(There is some uncertainty about that. The information the government has published says businesses will be asked to return pennies through their financial institutions in the fall of 2012. But it also says pennies can still be used in cash transactions indefinitely.)

But on top of that, Smith is concerned about where her business will end up when all the rounding off is tallied up at the end of the day.

“But in terms of rounding, the one concern that comes to mind is that government will still require the same percentage of GST and PST,” Smith said. “If you round down, we take in less and the government gets more of that sale.”

And to minimize the impact of the change, she said the store does far more business on debit and credit cards than with cash and those electronic transactions will continue to be settled to the nearest cent.

The Retail Council of Canada is staying on the sidelines until the final legislation is in place.

Lanny McInnes, the council’s local government relations and member services official, said, “It’s still up in the air. Once we know what the details are and how the federal government wants this to proceed, then we’ll be in a far better position to comment.”

But there seems to be little evidence there will be much push-back.

For many people, Todd Hirsch included, the attitude is more like — what took them so long?

“Back in 1990, when I was in grad school at the University of Calgary, I did a cost-benefit analysis term paper on this very question,” Hirsch said.

He believes if we’re going to take the trouble to get rid of the penny, we should keep going and get rid of the nickel and the quarter as well.

“We have a seven-coin system now, but all we need is four — the dime, the 50-cent piece, the loonie and toonie — and round everything up and down to the nearest dime,” said Hirsch.

martin.cash@freepress.mb.ca

Why is the government phasing out the penny? The penny’s purchasing power has eroded over the years and the government loses money on every new copper produced — about 0.6 cents per penny.

When will the penny stop being produced? The Royal Canadian Mint’s Winnipeg production facility will cease distribution of pennies to financial institutions this fall.

Will you still be able to use pennies at the store? Yes you will, and the cent will continue to be the smallest unit of currency. Pennies may continue to be used in cash transactions to make exact payment.

Will it have any effect on debit and credit card transactions? No. Non-cash payments, such as cheques, credit cards and debit cards will still be settled to the nearest cent.

Is there a standardized way businesses should round off final prices? Yes, the federal government is advising businesses are expected to round prices in a fair, consistent, and transparent manner: rounding down from $1.01 or $1.02 to $1 and and rounding up from $1.03 and $1.04 to $1.05.

Should retailers round off before or after the GST and PST? It should be done after the taxes are added. The GST or PST, whether for cash or non-cash transactions, will continue to be calculated to the penny.

Have other countries got rid of low-denomination coins? Plenty of them, including Australia in 1992, Brazil in 2005, Israel in 1991 and 2008, the Netherlands in 2004, New Zealand in 1989 and 2006, Norway in 1972 and 1991, Sweden in 1971, 2002 and 2009, Switzerland in 2006 and United Kingdom in 2004.