Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS

Second Regular Session

HOUSE BILL NO. 2045

Introduced by HON. ROZZANO RUFINO B. BIAZON

EXPLANATORY NOTE

This proposed measure seeks to mandate business establishments to implement price
rounding on their cash transactions which will be anchored on the 25-Sentimo. Cash
transactions will be restricted to values carrying 0, 25, 50 or 75 for the sentimo component as
a result of this proposed legislation.'

Coins function primarily as a medium of exchange. However, inflation erodes the
purchasing power of coins over time. This limits the economic usage of coins in serving as
medium of exchange for cash transactions, particularly low-denominations.

The market could adjust accordingly to this occurrence out of convenience. On one
hand, buyers usually volunteer to accept change that is derived from a rounded total amount
which is different from the exact value of the total transaction. On the other hand, sellers may

" Using the 25-Sentimo asthe base currency on which the rounding scheme will be anchored, the rounding scheme could be implemented, a
follows:

Traarpige | Reeeding | emia) ig
000-012 v 000
013.035 * 035
026037 ¥ 03s
038050 * 030
050-062 v 0.50
069-075 * 075
075087 ¥ 075
8-000 5 10

For example, if « cash transaction is valued at PhPI3.64, the truncated sentimo component is 0.68 which falls in the range 0.625-0,750.
Following the rounding scheme, the rounded centavo component is 0.75 and the value of the cash transaction would be rounded up to
PhPIS.75

‘On the other hand, if a cash transaction is valued at PRP8.54, the truncated sentimo component is 0.54. This falls in the ange 0.500-0625.
“The rounded sentimo component is 050 and the value ofthe cash transaction would be rounded down to PhP8.50.


exploit price structures that anticipate rounded figures. Although individuals may enter into
price rounding voluntarily, implementing price rounding as a policy that is mandated by law
will prevent abuses from either buyers or sellers by setting forth the guidelines and legal
framework that will govern price rounding. This policy will also ensure faimess to consumers
as well as businesses.

Price rounding refers to the practice of rounding up or down the amount to be paid, as
‘opposed to paying the exact amount. The most important benefit derived from the application
of a rounding rule is the efficiency gains from the non-minting of low-denominated coins
whose economic usage has been eroding over time. It may be noted that low-denominated
coins have negative seigniorage.? The non-minting of low-denominated coins frees up financial
resources meant for the production of these coins. Moreover, rounding will serve to minimize
the handling costs for retailers and financial institutions.’ The convenience gains and reduction
in costs represent reciprocal benefit to members of the public that are parties to cash
transactions.

There are a number of countries that have implemented price rounding rules for cash
transactions. Belgium, Finland, Netherlands, and Ireland are among the countries in the
European Union that have adopted rounding. Sweden, Norway, Denmark, the Czech Republic,
and Hungary are countries outside the Union that have also implemented rounding. Outside of
Europe, Canada, Australia, New Zealand, South Africa, Malaysia, Singapore, the Easter
Caribbean Currency Union, and Israel have instituted a rounding policy in their respective
jurisdictions.

To determine the feasibility of adopting a price rounding scheme for cash transactions
in the Philippines, the Bangko Sentral ng Pilipinas (BSP) invited key stakeholders during its
public consultations on price rounding. Representatives from cooperatives, transport groups,
department stores, drug stores, government agencies, retailer groups, consumer protection
groups, vendors, and amusement park associations participated in these meetings. They were
held in the following key areas: Manila on 25 January 2017, Davao City on 13 February 2017,
Cebu City on 28 April 2017, and San Fernando, La Union on 14 June 2017.

A survey was also conducted during the public consultations. Results of the survey
showed that stakeholders expressed their overwhelming support for the initiative, with 98.1
percent of respondents expressing approval of price rounding. In addition, 92.4 percent of the
respondents expressed preference for coursing the implementation of the policy through a
legislative process. Respondents also favored the dropping of 10-, 5-, and 1-Sentimo coins,
while 94.3 percent favored the retention of 25-Sentimo coins.* Stakeholders were amenable to

°Seigniorage refers to the difference between the face value ofthe coin and the unit cost of producing and issuing it. Positive seigniorage
‘means thatthe unit costs less than the face value and producing the coin provides income to the stat. Negative seigniorage on the other
hhand refers tothe situation where the coin is more expensive to produce per unit as compared to the face vale.

> Mints produce vasly more coins than are circulated andthe loss rate is much higher for coins of smaller value (Wood, 2010). ‘This is the

reason why central banks that try to service faithfully the demand for low-denominated coins would have to issue larger volume of coins

(European Commission, 2013, p.10). ‘The high oss rate is a manifestation that low-value coins, particularly 10-, S-and I-Sentimo coins are

perceived to have insignificant or no value. Thus, these coins are often neglected and are not recirculated in the market but are kept at drawers,

Piggy banks, jars, or even outright discarded.

Handling costs ae incurred by ears and financial institutions, which would factor into the storage, shipping. distribution
example,

transportation,
‘and processing of superfluous coins. These cash-related costs can also become substantial. Leszko (2009) also discusses how, for
‘in Canada, a cash transaction involving pennies would, on average, take two seconds longer than one that does not.

“The results ofthe survey showed that out of 10S respondents, 78.1 percent, 75.2 percent, and 63.8 percent agreed to drop from circulation
the 10-, S- and I-sentimo coins, respectively.

2


1a price rounding scheme where cash transactions would be rounded upward or downward to
the nearest 25-Sentimo.* The results of the survey are consistent with the findings of a previous
‘one conducted by the BSP in 2015.°

Price rounding implemented through legislation is expected to complement Republic
Act No. 109097 or the “No Shortchanging Act of 2016,” which mandates business
establishments to give exact or excess change — not less than the amount due — to consumers.
Ina regulatory regime where the two policies are in effect, establishments are expected to adopt
simplified price structures that would facilitate business transactions, while respecting the
rights of consumers against unfair trade practices. The proposed legislation will also be in line
with BSP’s mandate as the sole issuer of the currency (Section 50 of R.A. No. 7653).

In view of the foregoing, immediate approval of this bill is earnestly sought.

woh RU 5A foo

sentative
Lone Date Muntinlupa City

* For each cash transaction, rounding will be applied to the total cost ofthe items purchased, as opposed to it being applied to cach individual
item. Government fees or taxes are computed for the exact total value of the transaction prior to rounding.

* Im the third quarter of 2015, the BSP conducted two surveys on the usage of low-denomination coins by corporates and households inthe
Philippines. The results of the survey showed that for low-denominations coins such as 10-, 5- and I-sentimo, only a small percentage of
households (from 3.8 percent to 20.3 percent) sil use these coins for payment of goods and services while those that used them for change
ranged ftom 1.6 percent to 9.2 percent. More than three-fourths ofthe respondent houscholds said that these coins (10-,S-, and 1-sentimo)
‘ould already be dropped from circulation. Moreover, about three-fourths ofthe households wanted the 25-Sentimo coin to continue 10 be in
circulation. Likewise, more than 95 percent ofthe corporat respondents prefer the S-Sentimo to continue tobe in circulation. The corporates
regularly used the said denomination for change (70.3 percent) and payment for goods and services (49.2 percent)

7 Lapsed into law on 21 July 2016.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 7045

SS

Introduced by HON. ROZZANO RUFINO B. BIAZON

—

AN ACT GOVERNING THE ROUNDING OF THE TOTAL AMOUNT
OF CASH TRANSACTIONS

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled.

SECTION 1. Short Title. — This Act shall be known as the “Price Rounding Act of
2018”.

Sec. 2. Declaration of Policy. — It is the policy of the State to protect the interests and
promote the general welfare of the consumer as well as establish standards of conduct for
business and industry. Towards this end, the State shall implement measures to achieve the
following objectives:

(a) Protection of consumers from deceptive, unfair and unconscionable sales acts and
practices;

(b) Promotion of sound business practice that facilitates the conduct of transactions; and

(©) Maximization of resources of the State through policies responsive to the
requirements of the economy.

Sec. 3. Definition of Terms. — As used in this Act, the following terms shall mean:
(a) Basis unit of rounding — the basis unit of rounding shall be the 25-Sentimo;

(b) Business Establishment — any person, natural or juridical, whether single
proprictorship, partnership or corporation, including a government-owned and
controlled corporation or a government entity exercising its proprietary functions,
engaged in, or doing business in the Philippines, either in selling goods or providing
services;


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(a)

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(e)

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(m)

(n)

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Cash — banknotes and coins considered to be legal tender and issued by the Bangko
Sentral ng Pilipinas;

Cash Payment — the culmination at the point-of-sale for a reciprocal sales transaction
where the medium of exchange by which the goods or services is paid for is cash;

Consumer — any natural or juridical person who purchases goods or services in cash;

Goods — all types of tangible property that could be bought and sold, and the
possession of which could be transferred in whole or in part, temporarily or
permanently;

Gross sales — the total invoice value of sales, before deducting for customer discounts,
allowances, and returns;

Net sales — the total amount or value of a transaction, inclusive of applicable taxes, to
be paid by a consumer;

Non-cash Payment ~ a payment made by means other than cash, such as those by
‘means of electronic, online or mobile payment or with bank card, debit card or credit
card;

Prescribed terminal digits — the multiples of the basis unit of rounding to which the
terminal digits of the net sales, after rounding, are to be restricted. The prescribed
terminal digits are as follows: 0.00, 0.25, 0.50 and 0.75;

Price rounding the practice of rounding up or down the net sales of cash transactions
in accordance with this Act;

Rounding difference ~ the difference between the net sales of the cash transaction
before the application of rounding and the post-rounding value of the transaction;

Services ~ all types of commercial activities which enable the supply, access to,
consumption or use of goods, intellectual property, or other services;

‘Symmetric rounding — a rounding scheme whereby the terminal digits of the net sales
in a cash transaction is rounded up or down to the nearest prescribed terminal digits;

igits — the sentimo component of the figure representing the value of the
transaction. In peso-denominated transactions, the terminal digits refer to the two
digits to the right of and after the decimal point.

Sec. 4. Regulated Acts. — It shall be the duty of the business establishment to apply the

price rounding mechanism on the net sales of a cash transaction in accordance with this Act.

@

In General. Any business establishment which sells goods or provides services shall
apply the price rounding mechanism on the net sales of a cash transaction using the
basis unit of rounding pursuant to Section 5 hereof.


(b) Rounding difference. The rounding difference shall be reflected on the receipt of the
cash transaction, whether debited or credited from the original amount prior to price
rounding. It shall not exceed 12.5 centavos for any particular total cash transaction,
according to the 25-Sentimo basis for rounding.

Sec. 5. Price Rounding Mechanism of Cash Transactions. — If the terminal digits of the
net sales of a cash transaction are not equal to 0.00, 0.25, 0.50 or 0.75, price rounding shall be
applied using symmetric rounding, as follows:

(a) If the terminal digits of the net sales of the cash transaction are from 0.00 to 0.12, then
the net sales shall be rounded down to 0.00. The prescribed terminal digits of the cash
transaction shall be 0.00.

(b) If the terminal digits of the net sales of the cash transaction are from 0.13 to 0.25, then
the net sales shall be rounded up to 0.25. The prescribed terminal digits of the cash
transaction shall be 0.25.

(c) If the terminal digits of the net sales of the cash transaction are from 0.26 to 0.37, then
the net sales shall be rounded down to 0.25. The prescribed terminal digits of the cash
transaction shall be 0.25.

(d) If the terminal digits of the net sales of the cash transaction are from 0.38 to 0.50, then
the net sales shall be rounded up to 0.50. The prescribed terminal digits of the cash
transaction shall be 0.50.

(e) If the terminal digits of the net sales of the cash transaction are from 0.51 to 0.62, then
the net sales shall be rounded down to 0.50. The prescribed terminal digits of the cash
transaction shall be 0.50.

(f) If the terminal digits of the net sales of the cash transaction are from 0.63 to 0.75, then
the net sales shall be rounded up to 0.75. The prescribed terminal digits of the cash
transaction shall be 0.75.

(g) If the terminal digits of the net sales of the cash transaction are from 0.76 to 0.87, then
the net sales shall be rounded down to 0.75. The prescribed terminal digits of the cash
transaction shall be 0.75.

(h) If the terminal digits of the net sales of the cash transaction are from 0.88 to 1.00, then
the net sales shall be rounded up to 1.00. The prescribed terminal digits of the cash
transaction shall be 0.00 and the 1- peso unit in the latter shall be carried over and added
to the peso unit digit.

(i) If the terminal digits of the net sales of the cash transaction are exactly 0.00, 0.25, or
0.50, then price rounding shall not be applied.


Pre-Rounding Post-Rounding
Terminal Digits | Rounding | Terminal
Digits
0.00-0.12 v 0.00
0.13-0.25 a 0.25
0.26-0.37 Vv 0.25
0.38-0.50 x 0.50
0.51-0.62 Vv 0.50
0.63-0.75 x 0.75
0.76-0.87 v 0.75

Sec. 6. The No Shortchanging Act of 2016. - For the avoidance of doubt, any change
that is given to a consumer after application of price rounding pursuant to this Act shall not be
considered a violation of Republic Act No. 10909 or the “No Shortchanging Act of 2016.”

Sec. 7. Excluded Items/Transactions. ~The following items and transactions shall not
be subject to price rounding as set forth in this Act:

(a) Non-cash payments;
(b) Cost of individual items in a cash transaction;

(©) Gross sales;

(d) Applicable customer discounts, allowances, or returns; and
(e) Applicable fees, taxes, or other duties.

Sec. 8. Implementing Rules and Regulations. ~ The BSP, in consultation with the
appropriate stakeholders and other government agencies shall, within one hundred twenty
(120) days from the effectivity of this Act, promulgate the rules and regulations necessary to
effectively implement the provisions of this Act.

Sec. 9. Information Campaign. ~The BSP shall undertake to implement an information
and education campaign to inform and provide knowledge to consumers of the provisions of
this Act.

Sec. 10. Separability Clause. — If for any reason, any part or provision of this Act is
declared invalid, such declaration shall not affect the other provisions of this Act.

Sec. 11. Repealing Clause. — All laws, decrees, executive orders, issuances, rules and
regulations or parts thereof which are inconsistent with the provisions of this Act are hereby
repealed, amended or modified accordingly.

Sec. 12. Effectivity. — This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in two (2) newspapers of general circulation.

Approved,