A Canadian Senate committee on Tuesday urged the government to remove the penny from circulation, saying the cost of producing and distributing the coin is more than its actual value.
"We have concluded that removing the one-cent coin from circulation is long overdue," committee chair Senator Joseph Day said in a statement urging the government to remove the coins from circulation.
"The penny has simply outlived its purpose," added Senator Irving Gerstein, who had called for a study of the issue.
"It is a piece of currency, quite frankly, that lacks currency," he said.
"In fact, a penny can?t even buy a penny anymore, and this is the heart of the issue. It costs far more than a cent to produce and distribute each penny."
The committee heard from representatives of the federal government, banks, consumer associations, retailers, charities, universities, coin collectors and foreign governments.
It recommended removing the copper coins from circulation within one year and then rounding after-tax total purchases to the nearest five cents, but only for cash transactions.
The committee looked at the costs and productivity loss for Canadian businesses that must count, handle and redistribute the coin, as well as other countries' experiences with eliminating low-denomination coins.
Finland, Sweden, Norway, Denmark, Israel, the Netherlands, Australia, New Zealand, France, Spain, South Africa, Switzerland and Brazil have eliminated single-unit coins from their decimal-based currency systems.
Britain eliminated its half pence coin, Australia and New Zealand removed both their one- and two-cent coins from circulation, and New Zealand did the same with its five-cent coin.
In March, Canada announced that bills would be printed on more durable polymer instead of cotton-based paper to save money. The mint is also changing the composition of one-dollar and two-dollar coins to reduce costs.
The Senate committee in its report noted that Canada's one-cent coin had lost 95 percent of its purchasing power since it was first introduced in 1908. "What used to cost a penny now costs twenty cents," it said.
The coins are no longer accepted in vending machines and cannot legally be used more than 25 at a time to pay for purchases. Many consumers hoard them, give them away or discard them.
Removing the penny from circulation, the committee concluded, would have no impact on inflation, pricing, or on charitable donations, but it would reduce costs to taxpayers and enhance the productivity of Canada's retail and service sectors.
Source: AFP American Edition