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0.001% and Counting: Revisiting the Price Rounding Tax

Author

Listed:
  • Doron Sayag

    (Bar-Ilan University [Israël], Israel Central Bureau of Statistics)

  • Avichai Snir

    (Bar-Ilan University [Israël])

  • Daniel Levy

    (RCEA - Rimini Center for Economic Analysis, Emory University [Atlanta, GA], Bar-Ilan University [Israël], ICEA - International Centre for Economic Analysis, ISET - International School of Economics at TSU)

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 & Avichai Snir & Daniel Levy, 2012. "0.001% and Counting: Revisiting the Price Rounding Tax," Post-Print hal-05349980, HAL.
    • Handle: RePEc:hal:journl:hal-05349980
    DOI: 10.1111/coep.70020
    Note: View the original document on HAL open archive server: https://hal.science/hal-05349980v1
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