China to Introduce VAT on Condoms and Contraceptives in Unprecedented Move

In a significant shift, China is poised to implement a value-added tax (VAT) on condoms and other contraceptive methods for the first time in thirty years. This decision emerges as part of broader efforts aimed at boosting the nation’s declining birthrate and modernizing its tax framework.

Details of the New VAT Implementation

Starting January 1, these products will be taxed at a rate of 13%, a stark contrast to the previous exemption that has been in place since the introduction of nationwide VAT in 1993. This change, embedded within a new VAT law enacted in 2024, is part of a comprehensive strategy to reform China’s tax system, which currently relies on VAT for nearly 40% of its overall tax income.

Background on Birthrate Initiatives

For over thirty years, China enforced a one-child policy, but in response to a declining birthrate over the past decade, the government has begun employing a range of incentives to encourage larger families. These include increasing the allowable number of children per couple from one to three, and various local initiatives offering financial support for assisted reproductive technologies and cash bonuses for families with more children. Additionally, newlyweds in some regions are being granted extra paid leave to promote marriage.

Public Reaction and Criticism

The decision to impose a tax on condoms and contraceptives has drawn mockery from many on social media. A post on Weibo reflected a common sentiment: “What is wrong with modern society? They are truly going to extreme lengths just to make us have children.”

Broader Legislative Changes

Along with the new VAT on contraceptives, the updated tax law introduces tax incentives aimed at supporting childcare services and “marriage introduction services.” This year alone, the government allocated 90 billion yuan (approximately $12.7 billion) for a national childcare subsidy program, promising families 3,600 yuan per child under three years old. To further alleviate costs, plans to extend national healthcare insurance to cover all childbirth-related expenses have also been announced.

Challenges Ahead

Despite these initiatives, the new strategies have yet to yield significant results. In 2024, China’s birthrate stood at a mere 6.77 per 1,000 people—an increase from the previous year but still alarmingly low compared to historical averages. A rising death rate, largely due to an aging population, has meant that the overall number of inhabitants has been decreasing for more than three years.

Concerns Over Government Surveillance

Amidst these challenges, there are reports suggesting that authorities might resort to more intrusive measures to meet the national goal of encouraging births. Some women have reported being contacted by local officials for information regarding their menstrual cycles and family planning, prompting backlash on social media. Users have expressed concerns that such actions tread dangerously close to invasive regulation of personal lives.

The Symbolism of the Condom Tax

The introduction of this tax is largely viewed as a symbolic gesture. A typical pack of condoms retails for around 40-60 yuan ($5.70-$8.50), while contraceptive pills can cost between 50-130 yuan monthly. He Yafu, an independent demographer, remarked, “Now that China’s birth policy has shifted to encouraging births and no longer promotes contraception, it is reasonable to resume taxing contraceptives. However, this measure is unlikely to significantly impact the fertility rate.”

Impact on Women and Contraceptive Access

Experts, including Yun Zhou, a sociology professor, warn that while the tax might not directly influence decisions about having children, it sends a clear message about the government’s perception of desirable family structures. Zhou emphasized that any challenges in accessing contraception could disproportionately affect women, particularly those from disadvantaged backgrounds.

Conclusion

As China moves forward with its tax modernisation plans, the decision to tax contraceptives illustrates the complexities of its approach to managing population growth. While the government seeks to bolster its revenue, how this will impact social norms and individual choices remains uncertain.