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Ministry drafts planned in-store cash rounding rules

Euro bills and coins at a cash register.
Euro bills and coins at a cash register. Source: Ministry of Finance/Raigo Pajula

The Ministry of Finance has sent for approval legislative amendments which, should they enter into law, would lead to a cash rounding off system being applied in stores, for those paying for their purchases in cash.

The ministry says that this will reduce the reliance on smaller denominations, namely one- and two-cent coins, whose production and usage is wasteful.

Minister of Finance Mart Võrklaev said: "Smaller coins often tend to remain in the bottom of the pocket or get lost, making it effectively lost money for many people. With this amendment, however, we will overhaul everything and, among other things, help the environment."

While one- and two-cent coins are, the ministry says, rarely used to pay for purchases in stores, the cost of producing them, the wastage noted above, and the impact on the environment, outweighs this.

"If we reduce the need to use small denominations, we can also bring down costs relating to production, handling and the environment," Minister Võrklaev went on, via a press release.

However, phasing out the coins and rounding off will not lead to further inflation, he said.

"This change will not lead to a rise in prices or a need to change the prices of individual goods. As a result [of the amendment], the price of a shopping basket paid for in cash will either fall or rise, by up to two cents. The rounding off choice remains with the buyer, because they have the option; when paying with cash, the price is rounded off, but not when paying by card. The retailer does not have to make any choices, as in their case the rounding off would happen automatically, and as noted would depend on the customer's payment method," Võrklaev went on.

The amendment will mean that the cost of items purchased when paying by cash will be rounded up or down to the nearest five cents, with the exception of single-item purchases, which will remain at their advertised price.

In short, checkout sums ending in one, two, six or seven cents will be rounded down, whereas those ending in three, four, eight or nine cents will be rounded up. A customer can then either "win" or "lose," by up to two cents, on their purchase.

Since rounding is done up or down according to arithmetical rules, the ministry says, its effect evens out over time (ie. making multiple purchases with cash over time would not mean a customer had spent more than their card-paying contemporaries).

This method, the ministry argues, would also be easier for retailers than having to re-price items, given that a selection of goods is the customer's choice and not the store's.

The central Bank of Estonia (Eesti Pank) only gets back around 3 percent of the one- and two-cent coins it mints, though a recent initiative which allows members of the public to trade in, at selected Omniva post offices, their amassed small denomination coins for more rationalized denominations, has seen this proportion jump to 30 percent, the ministry says.

In recent years, the Bank of Estonia says it has released an average of 40 tonnes of one-cent and two-cent coins into circulation per year, only a very small proportion of which is used to pay for purchases.

Six other eurozone nations, namely Belgium, Finland, Ireland, Italy, the Netherlands and Slovakia, have already in recent years introduced similar rounding rules, while Lithuania has announced an intention to do so.

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Editor: Andrew Whyte

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