People in Ontario and British Columbia rushed to prepay their funerals last spring - not because they expect to die soon, but to beat the added cost of the new HST.
Consumers in those two provinces had until the end of June to avoid the harmonized sales tax - before that, only the GST applied to prepaid funerals. On a $10,000 funeral, the new HST adds about $800 in Ontario and $700 in B.C.
Many funeral homes launched marketing campaigns early this year to let their potential customers know of the deadline, and they appear to have been a huge success.
"There was a frenzy," said Harry Renaud, executive director of Guaranteed Funeral Deposits of Canada, a not-for-profit organization that helps 350 Ontario funeral homes manage the money they glean from prepayments. He said his organization usually receives about $3-million from its members to invest in a normal month, but in June the number reached roughly $58-million, almost 20 times the usual amount.
"It started in April, it grew bigger in May, and then the blitz hit in June," Mr. Renaud said. "We were totally overwhelmed."
GFD helped produce advertising materials for its funeral home members in advance of the HST changeover, and aggressive marketing appears to have helped drive the gains, Mr. Renaud said.
The B.C. funeral industry saw jumps in prepayment business of roughly 40 per cent in the months before July 1, said Justin Schultz, president of the Funeral Service Association of British Columbia. "It's clear that people did take advantage of getting ahead of the HST," he said.
The rise in prepaid funerals was reflected in the financial results of two of the biggest public companies operating in the sector in Canada.
Toronto-based Arbor which owns 82 funeral homes and 41 cemeteries, reported a 242-per-cent increase in the value of "preneed" funeral contracts in the quarter ended July 25, along with a 120-per-cent increase in preneed cemetery plots and a 47-per-cent jump in sales of niches, which are spaces for urns. While there were many factors leading to the increase - including a stronger economy - the implementation of the HST in Ontario and B.C. was clearly one of them, the company said.
At Service Corp. , a huge, Houston-based company that has more than 200 funeral homes and cemeteries in Canada (and about 1,400 in the United States), the value of prepaid funerals rose about 23 per cent in the quarter ended June 30. A "large percentage" of that gain was a result of the pre-HST activity in Canada, the company said.
Independent funeral homes also felt the same boost.
"There was very significant increase in interest and follow-through, that's for sure," said Mike Sheedy, vice-president of operations at Pinecrest Remembrance Services Ltd. in Ottawa. He said some funeral directors he has talked to reported that prepayment business in June was four to six times the regular rate.
The key question, now, is whether there will be a dip in the balance of the year. Mr. Sheedy thinks there will be a significant drop off - because some people merely made their arrangements a few months before they had planned to - but the year as a whole will still be somewhat stronger than usual, he said.
Mr. Reynaud, of GFD, said the publicity surrounding HST and prepaid funerals may get more people in the door over the longer term. "There is an awareness factor of preneed that didn't exist a year ago," he said.