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Ottawa keeping penny alive till 2013 to appease retailers’ concerns

Pennies are shown in Ottawa on March 29, 2012. The humble one-cent piece is set to disappear from Canadian pockets, a victim of inflation.

Sean Kilpatrick/The Canadian Press/Sean Kilpatrick/The Canadian Press

Canada's one-cent coin has been granted a brief reprieve from the scrap heap in order to placate retailers worried about a lack of pennies during the busy holiday season.

The federal government announced Monday it is postponing plans to stop circulating pennies this fall and will instead end distribution on Feb. 4, 2013.

As they disappear from circulation, Canadians will be forced to round off cash transactions to the nearest nickel.

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"The revised date was set following initial consultations with small business and retailers who requested the transition date occur after the busy holiday shopping season," the federal Finance Department said Monday.

"This will ensure all those participating in the transition will have ample time to prepare their business, train staff and better inform consumers."

The federal government stopped minting new pennies this past April, ending close to 150 years of Canadian penny production, but it is still ensuring there's a fair supply of the coins by distributing them to banks and other financial institutions.

The Harper government announced earlier in the spring that it was scrapping the penny, ending production of a coin that weighs down consumers' pockets while adding little to their purchasing power.

Back then, Ottawa had announced it planned to turn off the supply tap of pennies in the fall.

Karen Proud, vice-president of government relations for the Retail Council of Canada, said the new February deadline – after the Christmas shopping period – gives merchants more breathing room "so our members can really prepare and be ready and so that the consumer doesn't see any sort of chaos at the cash."

She said retailers are pretty happy the changeover doesn't come at "their busiest time of year."

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It costs Ottawa 1.5 cents to make each penny and eliminating this coin will save taxpayers $11-million annually.

Ottawa has suggested businesses round off cash transactions to the nearest five-cent increment but says it is leaving this to merchants and consumers to work out for themselves.

This rounding off would occur after taxes had been applied to the purchase and would not be necessary for credit or debit transactions.

The Royal Canadian Mint produced 660 million pennies in 2011, federal officials said.

Canada is hardly alone in scrapping the penny. At least 17 countries have ceased production of low-denomination coins over the past four decades.

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."

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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 government doesn't know exactly how many pennies remain in circulation, including those piling up in jars or cans. It noted that the study, by Desjardins Group, estimates 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've noted, would weigh 94 million kilograms. – or as much as 1,500 Leopard 2 tanks.

The federal government is encouraging charities to collect pennies from Canadians and redeem them through banks and the mint as a fundraising venture.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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