0.001% and Counting: Revisiting the Price Rounding Tax

Sayag, Doron and Snir, Avichai and Levy, Daniel (2025): 0.001% and Counting: Revisiting the Price Rounding Tax. Forthcoming in: Contemporary Economic Policy No. (Forthcoming)

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.

• Item Type: MPRA Paper
• Language: English
• 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
• Subjects: K - Law and Economics > K0 - General > K00 - General; K - Law and Economics > K2 - Regulation and Business Law > K20 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L4 - Antitrust Issues and Policies > L40 - General; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M30 - General

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