China Applies VAT to Contraceptives Amid Broader Tax Overhaul and Demographic Policies
From January 1, China will apply a 13% VAT on contraceptives while making childcare services, marriage-related services, and elderly care VAT-exempt as part of a wider tax reform. This policy change removes many VAT exemptions that had been in place since 1994 and is included in a broader package of measures aimed at boosting birth rates.
The reform coincides with demographic trends showing China’s births have declined for the third consecutive year, with 9.54 million babies born in 2024. The government’s efforts to encourage higher birth rates also include extending parental leave and providing cash handouts.
Value-added tax revenue contributes roughly $1 trillion to the economy, accounting for about 40% of total tax collection last year. Experts have expressed mixed views on the impact of the condom tax: some consider it largely symbolic, while others warn it may not significantly influence family planning decisions but could raise concerns over tax compliance and challenges for provincial financing.
Public reactions highlight worries about higher contraception costs potentially affecting families, as well as broader concerns over government intrusion in personal choices and the already high costs associated with raising children in China.
