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> Since Canada changed but left the taxes the same (14% in Ontario IIRC) there seems to be a lot of rounding-off in favour of companies instead of consumers. $
by nayuki 6y ago
> Since Canada changed but left the taxes the same (14% in Ontario IIRC) there seems to be a lot of rounding-off in favour of companies instead of consumers. $0.01-$0.02 per transaction
This assertion is wrong. If the item you buy is $1.00, then after your 14% tax it will be $1.14, which is rounded up to $1.15. If the item is $2.00, then after tax it is $2.28, which also rounds up to $2.30. But if the item is $3.00, then after tax it is $3.42, which rounds down to $3.40. If the item is $4.00, then after tax it is $4.56, which rounds down to $4.55.
Secondly, the rounding to nearest nickel is done per transaction, not per item. So if you go to a supermarket and pick up 3 items costing exactly $1.00, then the total you owe is $3.42 (which becomes $3.40 in cash), and it is that amount that is subjected to rounding, not the individual items (which are $1.13 and would round to $1.15).
I live in Toronto and have analyzed my retail receipts. (I'm aware the HST is currently 13% but that's not relevant to this argument.) The rule about rounding to the nearest nickel is sensible enough, but I've witnessed various weird behaviors. For example, each vendor has a different kind of wording to show how they rounded your cash transaction. Some use a negative sign to show that the penny rounding deducted money from your total owed, while some use a negative sign to show that the penny rounding increased your total owed (as if you paid negative money). Also, a few vendors always round down to the nearest 5 cents (to appear nice to the customer), which causes a surprise when I'm trying to prepare the correct amount of change. Finally, some vendors don't display cash rounding on their receipts, so for them it is an oral culture that isn't formally written down.
- arcticbull 6y agoCorrect, the process is "cash rounding" or "Swedish rounding" and all the details are here [1] for all the major countries that do it. In Canada: - Prices are rounded down to the nearest multiple of 5 cents for sales ending in: 1¢ & 2¢ (rounded to 0¢); and 6¢ & 7¢ (rounded to 5¢). - Prices are rounded up to the nearest multiple of 5 cents for sales ending in: 3¢ & 4¢ (round to 5¢); and 8¢ & 9¢ (round to 10¢). [1] https://en.wikipedia.org/wiki/Cash_rounding#Rounding_with_0.05_or_5_intervals https://en.wikipedia.org/wiki/Cash_rounding#Rounding_with_0....
- nik_0_0 6y agoVery interesting to check out how different POS systems handle the rounding! I share GP's assumption, assuming that businesses would re-price based on the final cost. There is a financial incentive to get the transaction to round up, and financial incentives are usually pretty motivating. (Given the max incentive is 5 cents per transaction, I might guess a focus on one-off transactions like a bag of chips, vs. the complexity of attempting to get the average grocery bill to end in the right #!) Would be interesting to see if the after-tax prices of potential single items (chips, water, pop) changed with this rule. Anything that was 99 cents, now that HST is 13%, comes to 111.8 cents, rounds to 110 cents. Bumping that to 100 cents even, rounds to 113, rounds up to 115. Profit of 5 cents on '99c/1$' item for 5% difference. Hard margins to give up!
- bzb3 6y ago>If the item is $4.00, then after tax it is $4.56, which rounds down to $4.55. Everybody who lived the transition to the Euro knows that this is not what will happen. Prices will be always rounded up.
- ComputerGuru 6y agoCanadians are nicer?
- highmastdon 6y agoI live in The Netherlands, we round mathematically. So nearest 5-cent.
- torgoguys 6y agoThat would probably be illegal in most jurisdictions in the US. I don't understand the big fuss over rounding in the discussion of eliminating the penny. Rounding happens. We already round sales tax up or down to the nearest penny--this would just round up or down to the nearest nickel. But while we are on the subject, I think we should eliminate nickels and quarters at the same time as the penny and just round to the nearest dime. (Let's put the 50 cent piece of of its misery while we are at it too--just dollars and dimes). Rounding to the nearest ten cents is plenty specific enough given the accumulated inflation/devaluation of currency over the years and you basically get to simply knock off one decimal digit of precision for each transaction which makes things more straightforward. Also, US dimes are small and lightweight, making them easy to carry relative to other coins.
- orangecat 6y agojust dollars and dimes Making change would require an average of 4.5 dimes, with a maximum of 9 that happens 10% of the time. Currently 9 coins are required only for 99 and 94 cents. (That's without half dollars, if you use them then it's only 8). If you have dimes and half dollars, it's an average of 2.5 and a max of 5. Also, US dimes are small and lightweight I find them to be too small. I like the simplicity of removing a decimal place, but I'd prefer penny-sized dimes and quarter-sized half dollars.
- Loughla 6y agoRegardless of what the practice is in Canada, I have zero faith in literally any US business to round down on anything, at anytime, for any reason at all. It will, I guarantee, be round up on everything.
- Broken_Hippo 6y agoHonestly, all folks would have to do is get a receipt that shows how much tax you paid. And even if they do always round up: It won't be that much - up to 4 cents per transaction. 125 transactions would only cost you $5 per month - and besides, businesses have actual costs to using cash. No pennies means less time handing out and counting change and less change to get from the bank. Not to mention the savings at the government level.
- deleted 6y ago[deleted]
- klyrs 6y agoIt's not merely "practice" in Canada, it's the law. And since most transactions are handled by software these days, it's pretty easy to implement and verify (jobs: secret shoppers). Subtler, businesses can try to game their prices to maximize rounding gains; also illegal (jobs: accounting, data analysis). For small businesses with antiquated tills, one should offer grants for upgrades and training (jobs: installation, manufacturing, tech support...).
- nybble41 6y ago> Subtler, businesses can try to game their prices to maximize rounding gains; also illegal (jobs: accounting, data analysis). It's actually illegal there to set prices such that they will generally round in the business's favor? Talk about micromanaging… If they change the tax rates do you have to update your prices so that they round evenly again? A fairer policy might be "round random" (e.g. 1.23 rounds to 1.20 40% of the time and to 1.25 60% of the time, since .23 is 60% of the way from .20 to .25). That would be harder to game by manipulating the prices. However, you would need to certify that the rounding was actually random; the result wouldn't be obviously correct for any particular transaction, only in aggregate.
- lovegoblin 6y agoAlso, it's only cash transactions that are rounded. If you pay by debit or credit (which I would guess is the majority?) then it's still the exact amount and nothing has changed.
- causality0 6y agoAll transactions are rounded. It's just that paying by card is rounded to the nearest cent instead of the nearest 5 cents.
- Aunche 6y agoA fun example of this is gas prices. It’s actually $1.999 a gallon instead of $1.99 a gallon.
- californical 6y agoWeird that people disagree with you -- try taking a 7% tax of $1.25. your total will be $1.3375 -> $1.34
- lovegoblin 6y agoIs it disagreement or just eye-rolling?
- mgbmtl 6y agoFun in Quebec: a 14.975% tax rate¹. The tax can be rounded per line item or on the total. ¹ it was so that the effective tax rate remained the same when Quebec stopped taxing the federal tax, which was pretty annoying for software.
- russdill 6y agoHow is this different from rounding sales tax to the nearest penny? Why should it be different?