Import duty hiked for cigarettes and energy drinks

Import duty hiked for cigarettes and energy drinks
March 05 16:58 2017

President Abdulla Yameen ratified Thursday import duty hikes approved by parliament for cigarettes and energy drinks.

The price of a pack of cigarettes has shot up from MVR48 (US$3.11) to about MVR75 (US$5) after the import duty hike from MVR1.25 to MVR2 per cigarette came into effect. The price of a single cigarette is up from MVR2.50 to about MVR4.

The parliament also approved charging an additional 25 percent of the invoice value for all tobacco items.

With the higher tariff of MVR33.64 (US$2.2) per litre, the price of energy drinks has also increased by about MVR8. The tariff for soft drinks was hiked to MVR4.60 per litre.

Energy drinks such as Red Bull are very popular among Maldivian youth despite health risks associated with high caffeine content.

The import duty hikes were among a raft of revenue-raising measures proposed in the 2017 budget to generate MVR209 million (US$13.5 million) in additional income.

The government-sponsored amendments to the import-export law were voted through 52-4 with three abstentions at Wednesday’s sitting of parliament.

The voting took place amidst protests in the parliament chamber by opposition Maldivian Democratic Party MPs.

Speaker Abdul Maseeh Mohamed called the vote while sitting in a seat reserved for ministers because MDP MP Fayyaz Ismail had taken over the speaker’s chair.

Ahead of the vote, Fayyaz sat down on the speaker’s chair in protest against Maseeh’s decision not to call a vote on his proposal to earmark five percent of import duty revenue to fund public health and awareness raising programmes.

According to MDP MPs, Maseeh did not offer a justification for refusing to put the amendment to a vote.

During the economic affairs committee’s review of the proposed hikes, Health Protection Agency officials had told lawmakers that that raising tariffs alone is ineffective without a multi-pronged approach to help smokers quit and discourage others from picking up the addictive habit.

HPA officials also bemoaned the lack of funds to conduct effective anti-smoking campaigns, pointing out that Philip Morris spends US$2.3 billion a year on marketing.

Customs officials meanwhile told MPs that the number of cigarettes imported to the Maldives increased to 497 million in 2016 from 460 million the previous year despite an import duty hike in April 2015 that jacked up prices from MVR38 (US $2.47) to MVR48 (US$3.11) a pack.

Hassan Mohamed, HPA deputy director and representative to the Tobacco Control Board, told MPs that several smokers wanted to stop when prices shot up from MVR15 (US$1) to MVR35 (US$2.2) a pack after a record 200 percent import duty hike in 2012.

But the health sector failed to “lend an adequate hand” with “cessation services, a quit helpline, or awareness programmes.”

Stressing the importance of banning the sale of loose or single cigarettes – which also enables minors to begin smoking – Hassan questioned the effectiveness of the proposed 66 percent hike since the price increase in 2012 from MVR1 to MVR2.50 per cigarette did not reduce demand.

After the next import duty hike from MVR90 laari to MVR1.25 per cigarette in 2015, he noted that some shops began selling for MVR3 per cigarette but were soon forced to offer the same price as others when the market price settled at MVR2.50.

A 2011 survey found that 38 percent of men and 3.4 percent of women in the Maldives are smokers. According to the health ministry, cardiovascular diseases, chronic respiratory diseases, and cancers are now among the leading causes of death in the country.

The HPA officials stressed that cigarettes are “a cancer-causing agent with more than 70 [hazardous] elements”.

According to customs officials, MVR622 million (US$40 million) was collected as import duties from cigarettes last year.

Fayyaz noted that the government could earn nearly MVR1 billion (US$64.8 million) by raising the tariff.