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This research assesses the economic impact of price rounding after the abolition of low-denomination coins in Israel.

December 21, 2025Contemporary Economic Policy0 citationsOpen Access

001% and counting: Revisiting the price rounding tax

DSDoron SayagNational Bureau of Statistics of China ASAvichai SnirBar-Ilan University DLDaniel LévyPrinceton University

Key Points

This research assesses the economic impact of price rounding after the abolition of low-denomination coins in Israel.
Analyzed price endings and basket sizes across various retail formats including supermarkets and convenience stores.
Used detailed transaction data to estimate the rounding tax effect on consumer spending.
The average rounding tax was found to be between 0.001% and 0.002% of revenues.
Indicates that the financial impact of rounding on consumers is significantly marginal.

Abstract

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 the distribution of 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.

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