OTTAWA, ON, Canada -- The Royal Canadian Mint reports that the government's Economic Action Plan 2012 calls for elimination of the penny from Canada's coinage system. Accordingly, the Mint will no longer distribute pennies, starting this fall. Existing coins will retain their value, and may be used indefinitely. But as they are withdrawn from circulation gradually, price rounding on cash transactions will be required.
The cent will remain the country's smallest unit for pricing goods and services. When rounding is necessary, it will be done on the final bill of sales, after calculation of the goods and services tax or harmonized sales tax. Noncash payments, including checks and credit or debit card transactions, will continue to be settled to the cent.
It now costs 1.6¢ to manufacture each penny, and the coin has lost much of its former utility. "Given its declining purchasing value, some Canadians consider the penny more of a nuisance than a useful coin," the Mint added.
Other nations that have eliminated their lowest-denomination coin include the United Kingdom, Australia, Norway and Switzerland. The UK discontinued its new halfpenny -- introduced in 1971 when the traditional duodecimal currency changed to a decimal system -- in 1984. Norway will start to phase out its 50-øre coin in May of this year; and Switzerland has eliminated its 1- and 2-rappen coins, starting before the millennium turned.
The Royal Canadian Mint explained that a "rounding guideline" has been adopted by other countries after doing away with their smallest denomination, and Canada will implement it, too. If the final bill of sale is $1.01 or $1.02, the consumer will pay $1; if it is $1.03 or $1.04, the payment will be $1.05. In Alberta, for example, if a cup of coffee costs $1.80, the 5% goods and services tax brings the final bill of sale to $1.89, and that is what a noncash purchase would cost. If paying in cash, the consumer would tender $1.90.