What Bangladesh Can Learn from the Maldives’ Tobacco Tax Reversal 

As Bangladesh continues to strengthen tobacco control through higher taxation, the recent policy shift in the Maldives deserves careful attention. While tobacco taxes remain an important tool for reducing smoking, the Maldivian experience suggests that taxation alone may not achieve the desired results if illicit trade is allowed to flourish. The episode offers valuable lessons for Bangladesh as it seeks to protect public health while safeguarding government revenue.

The Maldives has reduced its cigarette import duty by 50 per cent, lowering it from MVR 8 (approximately BDT 64) to MVR 4 (approximately BDT 32) per pack. The government says the decision followed discussions with the World Health Organization (WHO) after previous tax increases fuelled the illicit tobacco market instead of producing the intended outcomes.

Speaking in Parliament, Minister of Finance and Planning Moosa Zameer said higher cigarette taxes had unintentionally encouraged many smokers to switch to illicit cigarettes and alternative tobacco products. Instead of discouraging smoking and increasing revenue, the policy reduced legal tobacco sales while expanding the illegal market. By lowering the import duty, the government expects consumers to return to regulated products, thereby reducing illicit trade and improving tax collection.
Officials explained that the sharp rise in retail prices of legal cigarettes widened the price gap with illegal products. Rather than quitting smoking, many consumers simply chose cheaper illicit cigarettes. This shift reduced government revenue and prompted authorities to rethink the country’s tobacco taxation strategy.

The policy reversal is particularly significant because it comes less than two years after the Maldives received the WHO World No Tobacco Day Award in 2024 for strengthening tobacco control, including higher tobacco taxation. The shift from being recognised for raising tobacco taxes to subsequently lowering them illustrates how governments may revise policies when real-world outcomes differ from expectations.

For Bangladesh, tobacco taxation remains an essential public health measure, but its effectiveness depends on strong enforcement against illicit trade. If the price gap between legal and illegal products becomes too wide without effective border control and market surveillance, consumers may simply switch to illicit cigarettes rather than quit smoking. Such a trend would weaken both public health goals and government revenue.

The Maldivian experience is also notable because of the country’s geography. Malé, the capital, covers only about 5.8 square kilometres, and the nation has a relatively small population and compact land area. Yet authorities say illicit cigarettes continued to enter the market after taxes were increased, reducing legal tobacco revenue while overall cigarette consumption remained largely unchanged. If controlling illicit tobacco is challenging in such a small country, the task is likely to be even more difficult elsewhere.

Recognising these realities, the Maldives now believes narrowing the price difference between legal and illicit cigarettes will encourage smokers to purchase regulated products. Officials have also stressed that taxation alone cannot address illicit trade. Effective enforcement and a balanced tax structure must work together to achieve public health objectives without strengthening illegal supply chains.

The Maldives is not alone in facing this challenge. Bhutan, which once maintained one of the world’s strictest tobacco control regimes, eventually relaxed its restrictions after widespread smuggling and illegal sales undermined the effectiveness of its tobacco ban. The experience demonstrated that prohibition, without adequate enforcement, can unintentionally create opportunities for illicit markets.

Australia provides another important example. Despite imposing some of the world’s highest tobacco taxes, it has witnessed a significant expansion of illicit tobacco trade in recent years. Authorities have linked the illegal market to organised criminal networks, illicit distribution operations and violent attacks on tobacco retailers. Law enforcement agencies continue to seize large quantities of illegal cigarettes while the government loses substantial excise revenue, underscoring the unintended consequences that can arise when illicit markets expand.

One important point deserves attention. Although the Maldives government says the tax reduction followed discussions with the WHO, the organisation has not publicly confirmed recommending lower tobacco taxes. Until such confirmation is available, the government’s statement should be regarded as its own account of those discussions rather than an officially acknowledged WHO position.

For Bangladesh, tobacco taxation remains an essential public health measure, but its effectiveness depends on strong enforcement against illicit trade. If the price gap between legal and illegal products becomes too wide without effective border control and market surveillance, consumers may simply switch to illicit cigarettes rather than quit smoking. Such a trend would weaken both public health goals and government revenue.

Bangladesh’s current approach of combining tobacco taxation with enforcement against illicit trade, rather than relying solely on increasingly higher taxes or outright prohibitions, appears to reflect a balanced strategy. The experiences of the Maldives, Bhutan and Australia suggest that successful tobacco control requires more than tax increases alone. A sustainable strategy must combine sensible taxation, effective enforcement and practical policymaking to discourage smoking, protect government revenue and prevent illicit markets from undermining public health objectives.