China is increasing personal income tax deductions for child care, parental care and children’s education spending, the latest measures to try to address the country’s rapidly changing demographics and boost household consumption.
(Bloomberg) — China is increasing personal income tax deductions for child care, parental care and children’s education spending, the latest measures to try to address the country’s rapidly changing demographics and boost household consumption.
Effective from January 2023, the tax reduction for taking care of children under three and for children’s education will each be doubled from 1,000 to 2,000 yuan ($274) per month, the State Council said in a statement Thursday. The deduction to offset the costs of taking care of elderly parents will rise 50% to 3,000 yuan per month.
Chinese policymakers have been trying to address both a falling birthrate and an aging population, a combination that threatens the labor supply that’s fueled the country’s growth.
Read more: What China’s Falling Population Means for Its Future: QuickTake
Both central and local governments have been experimenting with policies designed to encourage people to have more children. Some regions have extended parental leave or offered cash incentives, such as subsidies or loans. In July, Beijing became the first major city in China to extend insurance coverage to assisted reproduction services including sperm optimization and in vitro fertilization.
The country is also considering raising the retirement age, which has been 60 for men and 50 or 55 for women for more than 40 years.
–With assistance from Li Liu.
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