Canada is scrapping the penny, ending production of the country’s smallest unit of currency this spring.
The 2012 federal budget, unveiled Thursday, announced the government will jettison the one-cent coin this year – a casualty of Ottawa’s drive for efficiency and thrift.
Finance Minister Jim Flaherty, whose department described the penny as a “nuisance” in budget documents, said the coin is now more trouble than it’s worth.
“Pennies take up too much space on our dressers at home,” Mr. Flaherty said to the Commons. “They take up far too much time for small businesses trying to grow and create jobs.”
This means Canadians must get used to rounding off cash transactions if they’ve got no pennies on hand – an arrangement the federal government says it’s leaving to consumers and businesses to work out.
“The penny is a currency without currency in Canada,” Mr. Flaherty told reporters.
The last one-cent coin will be minted this April, ending close to 150 years of the issuance of Canadian pennies. This unit of currency was first produced in 1858 although Canadian-based minting of the coin only began in 1908.
The Royal Canadian Mint will stop distributing pennies to financial institutions in the fall of 2012 and the government will work to withdraw one-cent coins from circulation.
The Harper government said the production cost of each penny exceeds its face value. “It costs taxpayers a penny-and-a-half every time we make one,” Mr. Flaherty told the Commons. “Therefore we will stop making them.”
Ottawa will save $11-million annually by scrapping the one-cent coin, an amount that reflects the cost of supplying the economy with both new and recirculated pennies.
The Royal Canadian Mint produced 660 million pennies in 2011, federal officials said.
The Harper government says savings for business and consumers will vastly exceed what Ottawa recoups by killing the penny.
A study by one Canadian bank, Desjardins, has estimated the economic costs of the penny for the private sector total $150-million annually. This includes counting, storing and transporting the coins.
The penny will continue to be Canada’s smallest unit of currency for pricing goods and services. Canadians who use credit or debit cards to make purchases won’t have to worry about rounding-off transactions.
The Canadian government is hardly alone in scrapping the penny. Federal officials noted that 17 other countries have ceased production of low-denomination coins over the past four decades.
The Finance Department recommends businesses cope with the demise of the penny by rounding off the value of cash transactions to the nearest five-cent increment.
This would take place after tax has been added to the price.
Ottawa says it won’t be policing consumer-business transactions, but added that “businesses are expected to round prices in a fair, consistent and transparent manner.”
It couldn’t guarantee consumers would be better off but cited a 2005 Bank of Canada study that concluded the inflationary impact of eliminating the penny would be “small or non-existent.”
The Canadian government had no estimates Thursday on how many pennies remain in circulation, including those piling up in jars or cans. It noted a Desjardins Group study that estimated Canadians could be hoarding several billion pennies.
Federal officials said more than 35 billion pennies have been minted in Canada in the past 104 years. This, they noted Thursday, would weigh 94 million kilograms – or as much as 1,500 Leopard 2 tanks.
The federal government says it will encourage charities to collect pennies from Canadians and redeem them through banks and the Mint as a fundraising venture.