People in China will pay a 13% sales tax on contraceptives starting January 1, as the country implements a tax system overhaul aimed at boosting its declining birth rate. The new tax, a value-added tax (VAT), applies to contraceptives including condoms, birth control pills, and devices, and removes exemptions that had been in place since 1994, when China was enforcing its one-child policy. At the same time, childcare services will be exempt from VAT, along with marriage-related services and elderly care, as part of a broader government initiative.
The changes are part of Beijing's effort to address an aging population and a sluggish economy by encouraging marriage and childbirth. Official figures indicate that China's population has declined for three consecutive years, with only 9.54 million births recorded in 2024, approximately half the number recorded a decade prior, when the government began relaxing its child policy. The birth rate decline has prompted a range of policy interventions.
The tax overhaul, announced late last year, also includes extended parental leave and cash handouts for new parents. The move to tax contraceptives has, however, sparked concern among some segments of the population. The government has not yet released detailed projections on the expected revenue from the contraceptive tax or the anticipated impact on birth rates.
The previous tax exemptions were introduced in 1994 as part of a broader economic reform aimed at promoting family planning during the one-child policy era. The current reversal reflects a significant shift in government priorities, now focused on reversing the demographic decline. The impact on contraceptive manufacturers and distributors remains to be seen, but analysts predict potential adjustments in pricing strategies to absorb the tax or pass it on to consumers.
The National Bureau of Statistics is expected to release further demographic data in early 2025, which will provide a clearer picture of the effectiveness of these policy changes. The government is also expected to announce further measures to support families and encourage childbirth in the coming months.
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