China Implements 13% VAT on Contraceptives Amidst Declining Birth Rates

New Tax Policy Takes Effect January 2026

Beginning January 1, 2026, China will implement a 13% Value-Added Tax (VAT) on contraceptive drugs and products, including condoms. This marks the end of a three-decade exemption for these items, a policy shift outlined in the country's newly revised VAT Law. The decision is aligned with Beijing's efforts to reverse a persistent decline in birth rates and mitigate a deepening demographic crisis.

Reversal of Decades-Old Policy Amidst Demographic Challenges

The reintroduction of taxes on contraceptives represents a significant departure from past policies. Since 1993, these products had been exempt from VAT, a measure initially put in place to promote family planning and support the strict one-child policy (in effect from approximately 1980 to 2015). However, China's demographic landscape has dramatically changed. The nation's population has shrunk for three consecutive years, with only 9.54 million births recorded in 2024, roughly half the number registered a decade ago when the one-child policy was lifted. This decline has led to India surpassing China as the world's most populous country in 2023.

Accompanying Pro-Natalist Incentives

Alongside the new tax on contraceptives, the revised VAT Law introduces several incentives aimed at reducing the financial burden on young families and encouraging childbirth. These include:

• Tax exemptions for childcare expenses, from nurseries to kindergartens.
• Exemptions for contributions to eldercare services and disability support.
• Tax relief for marriage-related services.

The central government has also implemented other pro-birth measures, such as cash subsidies, expanded childcare services, and extended parental leave. In July, a nationwide childcare subsidy of 3,600 yuan (US$503) per year for each child under three was introduced.

Public Debate and Expert Skepticism

The decision to tax contraceptives has ignited considerable debate on Chinese social media platforms like Weibo. Many users have expressed concerns that making condoms more expensive could lead to an increase in unintended pregnancies and potentially worsen the spread of sexually transmitted diseases (STDs). Data from China's Center for Disease Control and Prevention indicates that the HIV/AIDS infection rate rose from 0.37 to 8.41 per 100,000 people between 2002 and 2021, largely attributed to unsafe sex and limited sex education awareness.

Experts remain skeptical about the tax's effectiveness in significantly boosting birth rates. Demographer He Yafu from Beijing's YuWa Population Research Institute stated that the measure is 'largely symbolic and unlikely to have much impact on the bigger picture,' though it reflects an effort to shape a social environment that encourages childbirth and reduces abortions. Analysts point to economic and cultural barriers, such as the high cost of raising a child (estimated at over 538,000 yuan or $76,000 through age 18), a sluggish economy, and an unstable job market, as more significant factors influencing family planning decisions.