0.001% and Counting: Revisiting the Price Rounding Tax

Doron Sayag, Daniel Levy and Avichai Snir ()
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Doron Sayag: Department of Economics, Bar-Ilan University
Avichai Snir: Department of Economics Bar-Ilan University

No 2026-01, Working Papers from Bar-Ilan University, Department of Economics

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.

Keywords: Rounding Tax; Round Prices; Price Rounding Regulation; 9-Ending Prices; Just-Below Prices; Currency Indivisibility; Rigid and Flexible Prices; Elimination of Low-Denomination Coins; Cost of Producing Low-Denomination Coins; 1¢ coin; 5¢ coin (search for similar items in EconPapers)
JEL-codes: K00 K20 L11 L40 L51 M30 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2025-01
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Related works:
Working Paper: 0.001% and Counting: Revisiting the Price Rounding Tax (2025)
Working Paper: 0.001% and Counting: Revisiting the Price Rounding Tax (2025)
Working Paper: 0.001% and Counting: Revisiting the Price Rounding Tax* (2012)
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