As part of a major legislative change, authorities are preparing to apply a value-added tax (VAT) on condoms and other contraceptives for the initial occasion in over thirty years. This action aligns with the nation seeks to elevate its birthrate while concurrently overhauling its taxation system.
The Specifics of the New Tax Policy
Effective from 1 January, these family planning products will be subject to a 13% VAT rate – a levy from which they have been exempt since the nationwide VAT system was introduced back in the early nineties.
This measure was embedded in a comprehensive tax legislation passed in 2024, aimed at updating the country's tax regime. VAT currently accounts for close to forty percent of the government's overall tax income.
The Wider Backdrop of Pronatalist Policies
Following many years under a rigorous single-child rule, China has, over the past ten years, been rolling out a suite of incentives designed to encourage couples to expand their families.
These measures include:
- Raising the limit on the number of kids a family can have to three.
- Local governments testing discounts on IVF treatment and cash subsidies for extra children.
- Some municipal authorities providing additional holiday for recent marriages to promote marriage.
"What has happened to our world? They are truly going to extreme lengths just to make us have children," wrote one user on the social media platform Weibo.
Public Reaction and Symbolism
The prospect of condoms becoming more expensive has been greeted with derision on social media. At the same time, the updated legislation also includes a tax break for parenting costs and matchmaking activities.
Authorities have also earmarked 90bn yuan ($12.7bn) for its initial countrywide child support initiative, providing yearly payments of 3,600 yuan for each child under three. Plans were also announced to broaden state medical coverage to include all costs associated with delivery.
Limited Impact of Incentives
Yet, these inducements have shown little effect. In 2024, the birthrate was 6.77 births per thousand individuals, a slight increase on 2023 but still well under long-term averages. A rising death rate caused by a greying society means China’s population has been shrinking for three years running.
Potential Move to Coercive "Sticks"?
There are now concerns that officials could be resorting to more punitive measures to achieve the national policy goal of increasing the number of babies.
Reports have emerged of women in some areas getting calls from municipal officials asking about their periods and childbearing plans. For example, women in a county in Yunnan were reportedly required to report the timing of their most recent menstruation to local authorities.
"Today they require all women to report the time of their period, tomorrow it will be reporting the time of sexual intercourse, the day after tomorrow they’ll be calling to urge intercourse during the ovulation period … [this is] mass breeding," wrote a netizen.
Expert Analysis and Practical Impact
Hiking taxes on condoms is largely seen as a symbolic move. A typical packet of condoms is priced between 40 and 60 yuan ($5.70-$8.50). Birth control pills, purchasable without prescription, range from 50 to 130 yuan per monthly supply.
"Now that China’s birth policy has shifted to encouraging births and no longer promotes contraception, taxing these products again is logical," said He Yafu, an independent demographer. "Still, this step probably won't produce a significant effect on increasing the fertility rate."
Academic Yun Zhou, a sociologist, said that the new tax was unlikely to affect people’s decision-making, but it signified from the government "the ideal conduct for families." She further commented that if obtaining birth control grew harder, "the worst consequences will be endured by females, particularly by disadvantaged women."
Fiscal Updates and Income
The taxation reform includes formalising through legislation levies that were previously governed by regulations. Although income is required for financially pressed regional authorities, the contraceptive levy is not expected to generate a significant amount of money.
One estimate suggests that imposing VAT on these products might yield an extra five billion yuan per year – a drop in the ocean compared to China’s general public budget revenue of 22tn yuan. "We do not believe revenue generation is the primary motivation behind extending VAT to contraceptives," commented a specialist.