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0.001% and Counting: Revisiting the Price Rounding Tax

Author

Listed:
  • Doron Sayag

    (Department of Economics, Bar-Ilan University)

  • Daniel Levy

    (Department of Economics Bar-Ilan University, Department of Economics Emory University,ICEA, ISET at TSU, and RCEA)

  • Avichai Snir

    (Department of Economics Bar-Ilan University)

Abstract

In 1991 and 2008, Israel abolished the equivalents of 1¢ and 5¢ coins, respectively, effectively eliminating low-denomination coins and introducing rounding in cash transactions. When totals were rounded up, shoppers incurred a small rounding tax. Using detailed data on price endings and basket sizes across supermarkets, drugstores, small groceries, and convenience stores, we estimate that the magnitude of the rounding tax borne by Israeli consumers averaged only 0.001%–0.002% of revenues in the fast-moving consumer goods markets. These findings have implications for the ongoing debate regarding the desirability and viability of abolishing the 1¢ and 5¢ coins in the US.

Suggested Citation

  • Doron Sayag & Daniel Levy & Avichai Snir, 2025. "0.001% and Counting: Revisiting the Price Rounding Tax," Working Papers 2026-01, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2026-01
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    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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