The government has proposed amendments to the Import-Export Act that would reduce the current market price of cigarettes by 50 percent.
The bill proposes to lower the customs duty on cigarettes from 50 percent to 30 percent, while simultaneously reducing the specific duty from MVR 8 to MVR 4 per cigarette.
This adjustment represents a 50 percent reduction in specific duty and a 40 percent decrease in the ad valorem duty. This means the total duty levied on cigarettes is expected to be slashed by half.
Under the proposed legislation, relevant regulations must be amended within 30 days of the bill's passage. As a result, cigarette prices are expected to drop shortly after the law is enacted.
Furthermore, the government has proposed reducing duties on heated tobacco products in line with the changes for cigarettes. Currently, heated tobacco products are taxed at the same rate as conventional cigarettes.
The government first announced plans to lower tobacco duties ahead of the by-elections held on June 6. While the announcement was made by Minister of Homeland Security and Technology Ali Ihusaan, the government maintains that the decision to lower tobacco prices follows recommendations from the World Health Organization (WHO).
Following the government's previous tax hike on cigarettes, a black market for illicit tobacco emerged, leading to the widespread availability of counterfeit cigarettes across the Maldives. These counterfeit products are currently available at prices much lower than the original market rates.
