Ameer: Duty from cigarette imports has dropped from MVR 100mn to MVR 5mn

Earnings from the import of cigarettes has declined by MVR 95 million following the decision to double the import duty on the product, says Ibrahim Ameer, who served as the finance minister during the Maldivian Democratic Party (MDP) administration.

Ameer made the remark while discussing the fall in state revenue this year during the MDP’s ‘Havaru Beru’ panel discussion on Tuesday night.

The latest weekly fiscal report released by the Finance Ministry shows an 18.8 percent fall in state revenue as of February 6, compared to the same period last year. Tax revenue has fallen by around MVR 400 million. The biggest decline is in import duties, which fell from MVR 385 million to MVR 138 million – marking a 64 percent drop.

During Tuesday’s panel discussion, Ameer said the decline in revenue shows a slowdown in economic activity, with the MVR 40 million decline in Good and Services Tax (GST) alone indicative of a sharp decline in spending by the general population.

He also slammed Economic Minister Mohamed Saeed for comments he made to reporters earlier on Tuesday, when he said he does not know the reason for the sudden decline in state revenue or import duty.

“We found out today that this country’s economic minister does not know the reason why the state’s earnings from import duty has declined. Let me explain the reasons. Economic activities have stalled,” he said.

On November 1, 2024, the Maldives increased the specific rate of import duty on cigarettes and beedi from MVR 3 to MVR 8, and the ad valorem tax on the products by 50 percent.

Ameer alleged on Tuesday that the motivation behind the People’s National Congress (PNC) administration’s decision to double the duty on cigarettes hadn’t been out of concern over the health risks the product carries, but a desire to boost the state’s revenue.

Ameer said that the state had earned MVR 1.04 billion from cigarette imports last year, and had expected to double the earnings to MVR 2.1 billion this year.

“When I looked at the statistics the state earned MVR 5 million from cigarette imports in January. In January 2024, the state earned MVR 100 million from cigarette imports. It fell from MVR 100 million to MVR 5 million,” he said, adding that earnings from import duty had maintained the daily average in the last three months of last year, before declining sharply this year.

Ameer does not believe the state can generated the projected revenue for this year, or the be able to save MVR 7.7 billion as planned under its fiscal reform agenda.

He warned that the MVR 9.8 billion projected budget deficit will likely widen, forcing the PNC administration to supplement the budget.

During a meeting of the Parliament’s Public Accounts Committee on Monday, Deputy Speaker Ahmed Nazim, a senior politician from the PNC, said that he hasn’t seen any cut down in the state’s expenditure or an improvement in the country’s economic situation.

He also said tthat while the government has not explained the reason for the decline, the reason is clear from the statistics.

He said that cigarettes are the biggest source of revenue from import duty, and that there has been a slowdown in the import of the product since the hike in import duty on cigarettes took effect on November 1 last year, because businesses had stockpiled on the product beforehand.

On November 1, 2024, the Maldives increased the specific rate of import duty on cigarettes and beedi from MVR 3 to MVR 8, and the ad valorem tax on the products by 50 percent.

Tobacco importers and distributors raised the prices of cigarettes following this change, with the price of common cigarette brands rising between MVR 240 to MVR 290 per pack, and MVR 2,240 per carton.

While businesses initially reported a drop in the sale of cigarettes, there has been an increase in the sale of rolling tobacco as well as the smuggling of cigarettes.

On October 25, 2024, – just before the duty hike had been set to take effect – authorities raided The Hawks’ boatyard in K. Thilafushi and seized a shipment of 200 master cartons of Manchester brand cigarettes believed to have been smuggled into the country on one of the company’s ships.

And earlier this month, the police announced they had opened an investigation after 955 cases of tobacco products including cigarettes and pipe tobacco were illegally removed from two bonded warehouses, denying the state over MVR 67.9 million in duties.

In addition to raising the duty of cigarettes, the Maldives has also imposed a ban on vapes and e-cigarettes.