Government Seeks to Reverse Part of Tobacco Tax Increase

The government has proposed reducing tobacco duties nearly two years after significantly increasing taxes on cigarettes, a move that is expected to lower retail prices and marks a partial reversal of its previous taxation policy.

A bill to amend the Import and Export Act was introduced in Parliament today by Komandoo MP Mohamed Ibrahim on behalf of the government. The proposed legislation would reduce the import duty on cigarettes from 50 per cent to 30 per cent and cut the specific duty on cigarettes from MVR 8 to MVR 4.

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If approved, the relevant regulations must be amended within 30 days, allowing the reduced tax rates to take effect shortly afterwards. Cigarette prices are therefore expected to fall soon after the amendments come into force.

The proposal follows a sharp increase in tobacco taxes introduced in November 2024, when the specific duty on cigarettes was raised from MVR 3.30 to MVR 8. The government had argued at the time that the higher taxes would help reduce tobacco consumption.

The bill also proposes reducing duties on heated tobacco products. These products are currently taxed at the same rate as cigarettes and would continue to be subject to equivalent rates under the revised framework.

The government first announced plans to lower tobacco duties ahead of the 6 June by-elections. Interior Minister Ali Ihsan said at the time that cigarette prices would be reduced. However, the government has maintained that the proposed changes are based on recommendations from the World Health Organization (WHO).

The decision comes after concerns were raised about the growth of a black market for counterfeit cigarettes following the 2024 tax increase. Counterfeit products became widely available at prices significantly lower than those of legally imported cigarettes, according to reports from retailers and consumers.

Despite enforcement efforts, counterfeit cigarettes continue to be available in parts of the country.