China to hike tax on condoms in attempt to boost falling birth rate | China

China is set to impose a value-added tax (VAT) on condoms and other contraceptives for the first time in three decades, as the country attempts to increase its birth rate and modernize its tax laws.

From January 1, condoms and contraceptives will be subject to a VAT rate of 13% – a tax from which products have been exempt since China introduced nationwide VAT in 1993.

The measure was buried in a VAT law passed in 2024 with the aim of modernizing China’s tax system. VAT accounts for nearly 40% of China’s total tax revenue.

After imposing a strict one-child policy for more than 30 years, China over the past decade introduced a series of “carrots” to entice people to have more children in a bid to spur a falling birth rate.

In addition to increasing the limit on the number of children allowed per couple to three, provinces have experimented with offering discounts on IVF treatments and cash grants for additional children. Some local authorities offer newlyweds extra days of paid leave to encourage people to get married.

But the fact that condoms and contraceptives appear set to become more expensive has been ridiculed on social media. “What’s wrong with modern society? They really go to extreme lengths just to make us have children,” one user wrote on Weibo.

The new VAT law also provides tax relief for childcare and “marriage introduction services”.

This year, the government also allocated 90 billion yuan ($12.7 billion) to its first national child care subsidy program, providing 3,600 yuan a year for each child under the age of three. And on Saturday, she announced plans to expand her national health insurance program to cover all childbirth-related expenses.

But the incentives had little effect. In 2024, the birth rate was 6.77 per 1,000 people, a slight increase from 2023, but still well below historical levels. The increasing mortality rate caused by the aging population means that China’s population has been declining for at least three years.

There are now fears that authorities are turning to “sticks” to achieve the national policy goal of more babies.

In some areas, women reported receiving phone calls from local government officials asking for information about their menstrual cycles and childbearing plans. In December, Chinese media reported that women in a county in southwest China’s Yunnan province were required to report the date of their last period to local authorities. The local health office said data collection was necessary to identify pregnant women and pregnant women.

Responding to the news, a social media user wrote: “Today they demand that all women declare the time of their period, tomorrow they will indicate the time of sexual intercourse, the day after tomorrow they will call to urge sexual intercourse during the ovulation period… [this is] mass breeding.

The increase in taxes on condoms is largely a symbolic measure. A typical pack of condoms costs between 40 and 60 yuan ($5.70 to $8.50). The birth control pill, which can be purchased without a prescription, costs between 50 and 130 yuan per one-month pack.

“Now that China’s birth policy now encourages births and no longer promotes contraception, it is reasonable to start taxing contraceptives again,” said He Yafu, an independent demographer based in Guangdong province. “However, it is unlikely that this measure will have a significant effect on increasing the fertility rate.”

Yun Zhou, an assistant professor of sociology at the University of Michigan, said the new tax would likely not impact citizens’ decision-making, but it would signal from the government “what desirable family behavior should be.” Zhou added that if access to contraception became difficult, “the brunt of the negative effects would be borne by women, especially disadvantaged women.”

China’s plan to modernize its tax system includes codifying into law taxes that were previously governed by administrative regulations. But even though local governments are in dire need of revenue, some of which is struggling to deliver the child care subsidies they have promised, the condom tax is unlikely to raise a significant amount of money.

Lee Ding, director of Dezan Shira & Associates, a professional services firm focused on Asia, estimates that taxing contraceptives will raise an additional 5 billion yuan a year, a drop in the bucket compared to China’s general public budget revenue of 22 trillion yuan ($3.1 trillion). “We do not believe that revenue generation is the main motivation for extending VAT to contraceptives,” Ding said.

Additional research by Lillian Yang