The Maldives Fixed Tobacco Taxation, Not Tobacco Dependence

The Maldives appears to have begun drawing tobacco purchases back towards legal channels. The harder question is how that market correction can be converted into fewer smokers. Early evidence suggests that while tax changes influenced where smokers bought cigarettes, they had far less impact on whether smokers continued to use them.

In November 2024, the Government raised the import duty on cigarettes to MVR 8 per stick plus 50% of import value. The same rate was applied to heated-tobacco sticks, while most other tobacco products attracted a 200% duty. The new rates took effect on 1 November 2024.

The legal market subsequently contracted sharply. Data from the Maldives Monetary Authority’s Statistics Database show that the import value of tobacco and tobacco accessories fell from USD 23.14 million in 2024 to USD 14.19 million in 2025, a decline of 38.7%.

Commodity-level Customs data show an even steeper decline in cigarettes specifically. Recorded imports of cigarettes containing tobacco fell from 338.1 million sticks in 2024 to 76.2 million in 2025, a decline of 77.5%.

Import data cannot reveal precisely how many cigarettes were consumed. They do not capture existing stock, cigarettes carried in by travellers or products traded outside authorised channels. Nevertheless, the contraction showed that the legal market had been severely compressed.

A cautious recovery

The Government changed course in July 2026, reducing the specific duty to MVR 4 per stick and the percentage charge to 30%. Nicotine gum, nicotine patches and other products specifically manufactured to help smokers quit were made duty-free. The amendment took effect on 2 July.

The legal tobacco market had already begun showing signs of recovery before the reduction. During the first seven months of 2026, tobacco and tobacco-accessory imports were valued at USD 8.63 million, up 24.5% from USD 6.93 million during the corresponding period of 2025.

Most of that period preceded the July amendment, so the increase cannot be credited entirely to the lower duty. Customs’ more detailed January-to-July workbook nevertheless records 15.78 million cigarettes entering under the new 30% rate. That was equivalent to more than one-fifth of all cigarettes officially imported during 2025.

It is still too early to declare the revised rate a complete fiscal success. The safer conclusion is that the legal import market is recovering and that the lower duty gives authorised suppliers more room to compete. Whether this produces sustained revenue growth will require several more months of data. There is also a second question. Has the change done anything to reduce smoking?

The channel changed more than the consumer

A small, self-selected survey of adult tobacco users in Malé and Hulhumalé, conducted for this article, suggests that the immediate effect has been on purchasing channels rather than tobacco dependence.

Some 82% of respondents said they had noticed the price of legally sold cigarettes declining since July. The share saying they never bought cigarettes they believed might have been imported illegally rose from 55% before the duty change to 82% afterwards.

Yet 82% continued to name the same main category of tobacco product as before the change. Legal cigarettes may have become more competitive, but most respondents did not move away from their preferred form of tobacco.

The problem was not a complete absence of interest in quitting. Some 55% had attempted to stop smoking during the preceding 12 months. Of all respondents, 27% said they were still trying, while another 27% had returned to smoking.

Respondents were also asked how they might react if a non-combustible nicotine product, assessed by health authorities as lower-risk than cigarettes, became legally available at a lower price. Some 36% said they would consider switching completely. Another 36% said they would need more information, while 27% said they would continue smoking.

These responses describe stated intentions under a hypothetical scenario, not how consumers would necessarily behave in practice. It does, however, illustrate the distinction at the centre of the policy debate: reducing illicit purchases is not the same as reducing smoking.

A legal cigarette is better for government revenue than an illegal one. It is not better for the smoker’s lungs.

Tax policy is necessary, but not sufficient

Real progress will depend on pairing fiscal tools with cessation support, enforcement, and differentiated regulation. The Maldives’ experience suggests that tax increases need to be accompanied by stronger supply-chain enforcement, product tracking and meaningful support for smokers who want to quit. Otherwise, a sudden increase can weaken the legal market without eliminating demand.

Nor should “lower-risk” be confused with “safe”. WHO says all forms of tobacco are harmful and warns that electronic cigarettes carry health risks, particularly for young people and those who have never smoked.

Different products can still present different levels of risk, particularly when combustion is removed. The latest Cochrane review of electronic cigarettes for smoking cessation examined 90 completed studies involving more than 29,000 participants. It found high-certainty evidence that regulated nicotine e-cigarettes produced higher quit rates than nicotine-replacement therapy, amounting to approximately four additional quitters for every 100 people. The researchers also cautioned that larger and longer studies are needed to evaluate safety fully.

This does not mean the Maldives should automatically reverse its prohibition on the import, sale and use of vaping products. It means regulation should recognise differences between products while protecting young people and non-smokers.

A ladder, not a loophole

A differentiated framework should begin with the least controversial measures. Combustible cigarettes should remain at the top of the tax schedule. The duty exemption for approved cessation products should then be converted into practical access through pharmacies, clinics, counselling services and clear public information. Removing import duty will achieve little if smokers do not know what help is available or how to obtain it.

Other countries distinguish among nicotine products through taxation or product-specific regulation. The United States assesses modified-risk applications product by product, New Zealand, meanwhile, reduced excise and excise-equivalent duty rates on heated tobacco products by 50% in July 2024, with authorities continuing to monitor the policy’s effects. These approaches offer regulatory principles for consideration, rather than proof that the same measures would produce similar results in the Maldives.

Most importantly, the Government should measure more than imports and revenue. Future evaluations should track smoking prevalence, successful quitting, daily consumption, movement between tobacco categories and use among young people.

The Government has shown that fiscal decisions can rapidly reshape the tobacco market. The opportunity is to build on the recovery of legal trade by developing a framework that measures success through both government revenue and reductions in smoking.