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Bank of Estonia wants to take 1 and 2-cent coins out of circulation

The Bank of Estonia has come up with a plan to reduce the use of 1-cent and 2-cent coins before eventually removing them from circulation.

The central bank floated a proposal at Wednesday’s tax environment forum to discuss how to start rounding off cent values at vendors up and down to the nearest 5 cent-rounded amount in order to reduce the use of 1-cent and 2-cent coins in Estonia.

“On average two truckloads of 1 and 2-cent coins exit the Bank of Estonia every year that are handed as change to buyers in shops and are used very little after that. The proposal of the central bank is to discuss if there could be less of those cents in circulation that are very seldom used by the people,” the central bank’s vice president, Madis Müller, said.

Whereas people could continue to pay with 1 and 2-cent coins for purchases also in the future, such coins would no longer be handed back as change. According to the central bank, the end price would have to be rounded off only in the event of cash purchases, whereas with card payments the exact amount could continue to be charged.

For vendors, the rounding would mean having to update the software of cash registers.

According to Nele Peil, manager of the Estonian Traders’ Association, the rounding would be good both for vendors and consumers in the broader view, as clerks in stores would have to spend less time counting coins and businesses would have to spend less time on procedures related to them as well.

Peil said that as things stand now, the lowest-value coins are mostly discarded later, as many people find using them too troublesome.

According to recent opinion polls, more than half of Estonian residents are in favor of rounding. A poll of financial behavior taken in September 2017 indicates that 57 percent of Estonian residents are in favor of it, 33 percent do not support it, and 10 percent are unable to say.

There is no unanimity in the eurozone when it comes to the use of coin rounding. The European Commission does not recommend applying the rounding-off rule as long as residents of the country don’t support it. Five countries in the eurozone have switched to rounding off 1 and 2-cent coin values: Finland, the Netherlands, Belgium, Ireland, and Italy beginning this year. The experience of Finland, the Netherlands, Belgium, and Ireland shows that prices didn’t rise when the rounding was introduced. In all five countries, the supporters of rounding now outnumber the opponents.

As a next step, the Bank of Estonia will gather feedback to the proposal from different interest groups.

Source : news.err.ee


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