The Maldives has reduced the import duty on cigarettes by 50%, from MVR 8 (approximately BDT 64) to MVR 4 (approximately BDT 32) per pack, in what the government describes as a recommendation made following discussions with the World Health Organization (WHO). According to Maldivian authorities, the move is aimed at tackling the country's growing illicit tobacco market after previous tax increases failed to deliver the intended results.
In 2024, the Maldives was recognized by the World Health Organization (WHO) for strengthening tobacco control through higher cigarette taxes, receiving the World No Tobacco Day Award in recognition of its efforts to strengthen tobacco control, including higher tobacco taxation. Less than two years later, the country has reversed course by reducing cigarette import duties, with government officials saying the decision follows discussions with the WHO to address the country's growing illicit tobacco market.
Government officials say that higher cigarette taxes significantly increased retail prices, but instead of reducing smoking, they encouraged consumers to purchase illicit cigarettes and alternative tobacco products. The shift not only expanded the illegal market but also reduced government revenue from legal tobacco sales, prompting authorities to reconsider the country's taxation strategy. Speaking in Parliament, Minister of Finance and Planning, Moosa Zameer, said the decision followed discussions with the World Health Organization (WHO). He said the earlier increase in cigarette taxes had unintentionally encouraged smokers to shift towards illicit cigarettes and alternative tobacco products, resulting in declining government revenue from legal tobacco sales. According to the minister, lowering the import duty would help curb the illicit tobacco market while encouraging consumers to purchase regulated products.
The Maldives' experience is particularly notable given the country's small geographic size. Despite having a compact land area and a relatively small population, authorities say the illicit tobacco trade continued to grow even after tobacco taxes were increased. Officials believe reducing the price difference between legal and illegal cigarettes will help encourage smokers to return to regulated products while improving tax collection and reducing the appeal of the illicit market.
The development marks a significant policy shift for the Maldives and reflects a growing recognition that taxation alone may not be sufficient to address illicit trade. Authorities maintain that enforcement and a balanced tax structure are both necessary to ensure public health objectives are achieved without unintentionally strengthening illegal supply chains.
The Maldives is not the first country to revisit its tobacco control policies after facing challenges with illicit trade. Bhutan, which maintained one of the world's strictest tobacco control regimes for more than a decade, later relaxed its long-standing restrictions after widespread smuggling and illegal sales undermined the effectiveness of the ban. The experience demonstrated how prohibition can unintentionally create opportunities for illicit markets when legal supply is removed.
Australia has also faced growing challenges despite imposing some of the world's highest tobacco taxes. In recent years, authorities have linked the country's expanding illicit tobacco market to organized criminal networks, illegal distribution operations, and a series of violent attacks on tobacco retailers. Law enforcement agencies continue to seize large quantities of illegal cigarettes while governments face significant losses in excise revenue, highlighting the unintended consequences that can arise when illicit markets expand.
Although the Maldives is one of the world's smallest countries, with its capital Malé covering just 5.8 square kilometers, authorities acknowledge that they were unable to contain the illicit tobacco trade. Officials say illicit cigarettes continued to enter the market despite higher taxes, reducing government revenue while cigarette consumption persisted. Similar challenges led Bhutan to reverse its decade-long cigarette ban, while Australia continues to grapple with organized crime linked to its illicit tobacco market.
Although the Maldives government attributes the decision to recommendations made during discussions with the World Health Organization (WHO), the organization has not publicly confirmed making such a recommendation.
Against this backdrop, Bangladesh's current approach of balancing tobacco taxation with enforcement against illicit trade, rather than imposing outright bans, reflects a measured strategy aimed at protecting public health while safeguarding government revenue.
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