0.001% and Counting: Revisiting the Price Rounding Tax

Doron Sayag, Avichai Snir and Daniel Levy ()

MPRA Paper from University Library of Munich, Germany

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)
Date: 2025-11-05
New Economics Papers: this item is included in nep-mon, nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/126714/1/MPRA_paper_126714.pdf original version (application/pdf)

Related works:
Working Paper: 0.001% and Counting: Revisiting the Price Rounding Tax (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:126714

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().