Where there’s smoke: Australia’s high-tax tobacco crisis and lessons for policymakers

Maldives has recently drawn global attention for its shifting tobacco landscape — shaped by the world’s first generational smoking ban and some of the region’s steepest tobacco taxes. The ambition behind these policies is unmistakable. But as the country moves deeper into this approach, an important question emerges: is this the most effective path to achieving lasting public health outcomes — especially in a small island nation where success ultimately depends on how policy interacts with demand, consumer behaviour and market realities? Or does it risk unintended consequences that others have already faced?

As policymakers and the public debate what the coming years may look like, one international case offers a clear and relevant lesson. Australia — once praised as a global leader in aggressive tobacco control — illustrates what can happen when taxation and restriction advance without addressing how demand is redirected.

For more than a decade, Australia stood as a global model for strict tobacco regulation. High excise taxes, plain packaging laws, and assertive public-health campaigns were credited with shaping early progress. Over time, however, cigarettes became some of the most expensive in the world, while demand among long-term smokers persisted.

As prices rose, illicit supply expanded. Investigations uncovered illicit farms, misdeclared shipments, and organised distribution networks operating outside the legal market. Independent economic reviews estimated billions in lost revenue annually, highlighting how illicit tobacco flourished despite world-leading regulatory controls.

Australia did not fail due to a lack of effort or resources. It failed because demand did not disappear, and restrictive policies were not supported by regulated, lower-risk alternatives for smokers who could not or would not quit.

The Maldives’ policy landscape is different, but early signals warrant attention. Tobacco-prevalence trackers estimate that roughly one quarter of Maldivian adults smoke, with male rates exceeding 40%. Youth experimentation has also been documented in local surveys. Even before the generational ban came into effect, media reports consistently documented seizures of smuggled cigarettes — a sign that illicit supply chains were already active and responsive to price shifts and access pressures.

In an environment where demand remains, high taxes, limited substitutes, and rapid regulatory change can produce gaps that informal suppliers move quickly to exploit. These pressures tend to intensify over time if policy design does not address the underlying market dynamics.

Economic incentives add further complexity. In Australia, extreme pricing made illegal products more attractive. In the Maldives, high import duties and transport costs already elevate cigarette prices, and when combined with a permanent generational prohibition, profit margins for informal suppliers can widen.

Australia’s trajectory illustrates a pattern seen in many high-control environments: when regulatory ambition relies primarily on restriction and price pressure, illicit markets expand to meet persistent demand. This shift was not sudden. It was a gradual accumulation of pressures — behavioural, economic, and logistical — that eventually overshadowed the intended health-policy outcomes.

Australia does not predict the Maldives’ future, but it does demonstrate how extreme taxation and prohibition can produce unintended outcomes when not paired with balanced, multi-layered policy tools. Globally, the most durable tobacco-control frameworks are those that combine regulation with accessible, regulated alternatives that redirect demand away from illegal markets rather than forcing it underground.

The current Maldivian framework is ambitious. Its long-term impact, however, will depend on whether policy design evolves to reflect how smokers respond to restriction in practice. Introducing regulated alternatives and developing a more balanced mix of measures may offer a more durable path – one that reduces illicit-market incentives while supporting genuine public health goals.

Australia’s experience shows how extreme measures without complementary pathways can unintentionally expand the very markets they seek to eliminate. For Maldives, the lesson is straightforward: lasting progress depends not on pushing controls further, but on designing policies that align ambition with real-world behaviour — pairing regulation with workable, safe, and accessible legal avenues that guide demand toward lower-risk outcomes and support the long-term goal of a healthier, smoke-free generation.