The withdrawal of the one-cent coin from circulation began Monday, and according to the Retail Council of Canada (RCC), the majority of Canada’s businesses are ready for the phase-out.
RCC president and CEO Diane J. Brisebois says retailers are largely prepared, thanks to a delay of the phase-out until after the busy holiday season—a delay the RCC had advocated for.
“While we have been supportive of this initiative all along, we are grateful that the government delayed implementing the changes until this point, as retailers have needed the extra time to prepare,” she said.
Businesses have a choice of making change in pennies until the supply runs out, or rounding out the final amount (or equivalently the change owed) of any cash payment to the nearest five-cent increment.
Rounding details have been released by the Royal Canadian Mint in order to prepare consumers for the new guidelines. The biggest difference Canadians should see in their change is two cents more or less than previously.
Electronic transactions, such as debit, credit, and cheques, will remain unaffected. Being processed digitally, they are still able to be calculated to the cent.
According to an RCC survey, 55 percent of retailers are prepared for the phase-out. The survey found that 74 percent of small retail businesses and 75 percent of medium businesses will round out manually at the cash register.
However, 63 percent of large businesses are changing their point-of-sale systems, which could cost them more than $100,000, the survey found.
We are grateful that the government delayed implementing the changes until this point, as retailers have needed the extra time to prepare.
— RCC president and CEO Diane J. Brisebois
“While smaller businesses will do the rounding manually at first and then determine the appropriate course of action, both in relation to cost and customer service, it is not a practical approach for large retailers with thousands of employees,” said Brisebois.
“This of course represents a substantial cost for retailers to enable them to maintain standardization and meet consumers’ needs and expectations.”
The Mint stopped producing pennies in the spring of 2012 and began collecting them on Feb. 4. Approximately six billion pennies will be removed from circulation over the next six years.
Finance Minister Jim Flaherty announced the demise of the penny in last year’s budget because of its rising production cost relative to face value and the significant handling costs the penny imposes on retailers, financial institutions, and the economy in general.
The government said production costs per penny had reached 1.6 cents, causing taxpayers to lose money on a coin most do not use. Another reason for the economic toll was the increased accumulation of pennies by Canadians in their households, which meant more coins had to be minted to keep financial institutions supplied.
Is The Nickel Next?
Canada is not the first nation to eliminate its low-denominational currency. Australia removed its penny from circulation in 1992. New Zealand ceased production in 1989 and also removed its 5 cent coin from circulation in 2006, a move economists speculate Canada will follow.
As with the penny, many Canadians are not returning nickels into circulation either. This causes the volume produced to grow, leaving officials to question whether the production costs merit keeping the coin, which has a low face value.
NDP MP Pat Martin, who advocated for the removal of the penny, now says it’s time for the nickel to go, and to that end is planning to launch a private member’s motion to have the 5 cent coin eliminated.
The end of the penny brings some benefits to taxpayers, with estimated savings of $11 million a year, according to Department of Finance Canada.
The reduced production could also open doors to foreign business opportunities for the Mint.
Since 2000, countries such as Panama, New Zealand, Ethiopia, and Fiji have signed contracts to have the Canadian Mint produce coins using multi-ply plated steel technology. This revolutionary method of production developed by the Mint not only makes coins cheaper to produce but also more durable and difficult to counterfeit.
Currently Canada has an approximate 10 percent share in the global coin market. Mint CEO Beverley Lepine has said the aim is to increase that to 15 percent by 2020.
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