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China Plans to Make Caring for Under-Three-Year-Olds Tax Free to Boost Birthrate
Chen Yikan
DATE:  Jul 28 2021
/ SOURCE:  Yicai
China Plans to Make Caring for Under-Three-Year-Olds Tax Free to Boost Birthrate China Plans to Make Caring for Under-Three-Year-Olds Tax Free to Boost Birthrate

(Yicai Global) July 28 -- China has proposed making the cost of caring for infants and toddlers under the age of three eligible for special expense deductions from individual income taxes in order to reduce the financial burden of rearing kids on parents and encourage more births amid aging demographics.

The new policy, which will be one of seven special expense deductions introduced since 2019, is expected to be available to new parents in the second half or at next year’s tax remittance, said Feng Qiaobin, deputy secretary-general of the Society of Public Finance of China.

At present there are two methods currently under consideration. One is that a flat rate should be deducted, and the other is that only actual expenses can be subtracted.

The fixed rate is simple and fast and will be easy to collect and manage, especially at the beginning, said Li Xuhong, director of the Institute of Finance and Taxation Policy and Application at the Beijing National Accounting Institute.

Deduction standards should be set according to regional economic conditions as the cost of caring for infants and young children varies from city to city, said Shi Wenwen, director of the Center for Research in Fiscal and Tax Law of China University of Political Science and Law.

Income levels should also be taken into consideration, Shi added. For example, a tax free amount of CNY1,000 (USD154) per month could be raised depending on changes in living standards.

More consideration should be given to low- and middle-income people of childbearing age when determining the policy, Li said. Most infants and toddlers under the age of three are taken care of by families and the costs are huge and difficult to quantify.

China can also consider giving tax incentives to infant products and the construction of childcare institutions, he added.

Editor: Kim Taylor

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Keywords:   kids,tax break,third-child policy