Effective January 1, China implemented a 13% sales tax on contraceptives, including condoms, birth control pills, and devices, while simultaneously exempting childcare services from value added tax (VAT), according to an announcement made late last year. The tax overhaul, which eliminates exemptions in place since 1994, is part of a broader government initiative to boost the country's declining birth rates and address its aging population. Marriage-related services and elderly care are also exempt from VAT as part of the effort, which includes extending parental leave and issuing cash handouts.

The move comes as China's population has shrunk for three consecutive years, with only 9.54 million births recorded in 2024, approximately half the number recorded a decade prior when the one-child policy began to ease. The declining birth rate is contributing to a sluggish economy, prompting Beijing to implement measures encouraging young people to marry and have children, according to BBC News Chinese.

The reintroduction of the tax on contraceptives has raised concerns about unintended pregnancies and access to family planning resources. Osmond Chia, a business reporter, noted the potential impact on lower-income individuals and families. The previous VAT exemptions were initially introduced to promote family planning during the one-child policy era.

The broader initiative to stimulate population growth includes financial incentives and support for families. However, the effectiveness of these measures remains to be seen. Economists are closely watching the impact of the tax changes on both the contraceptive market and the overall birth rate in China. The government has not yet released specific projections for the anticipated increase in birth rates resulting from these policy changes.