“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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