From A Wiki of Ice and Fire
The dwarf's penny is the name given by the inhabitants of King's Landing to a tax on whoring during the War of the Five Kings.
A Storm of Swords
Lord Tywin Lannister, the Hand of the King to Joffrey I Baratheon, imposes a penny tax on prostitution to improve public morals and to raise funds for King Joffrey I Baratheon's upcoming wedding. Tywin's dwarf son Lannister is blamed for the tax, however, because he serves as the small council's master of coin.
Tyrion: The master of coin must remain at court to see that all the armies are paid for.
Olenna: To be sure. Dragons and stags, that's very clever. And dwarf's pennies as well. I have heard of these dwarf's pennies. No doubt collecting those is such a dreadful chore.Tyrion: I leave the collecting to others, my lady.
- ↑ A Storm of Swords, Chapter 38, Tyrion V.
- ↑ A Storm of Swords, Chapter 60, Tyrion VIII.