There is strong evidence for the effectiveness of tobacco taxes on reducing smoking at a population level, both in Australia and internationally. While Australia has implemented tobacco taxation at levels in line with the WHO’s recommendations, critics claim this policy has unintended negative impacts on health equity and has caused growth in the illicit tobacco trade (ITT). Higher tobacco prices can drive consumers to seek cheaper illicitly traded untaxed tobacco products, however this simplistic argument is too easily used to justify proposals (typically made by the tobacco industry) for dismantling restrictions that have reduced smoking in Australia, especially taxation. We argue that simply reducing tobacco taxes does not effectively address health equity and the ITT. Tobacco taxes would need to be drastically reduced to compete with untaxed alternatives and would lead to increased smoking uptake and reduced cessation, especially among young people, while simultaneously reducing the government revenue available to fight tobacco smuggling, support people to quit smoking and treat smoking-related diseases. Rather than simply making all tobacco cheaper, it is crucial to allow time for recently implemented regulations and law enforcement measures to take effect. Ultimately, demand for illicitly traded tobacco is most effectively reduced by reducing demand for all tobacco products, including through ‘endgame’ measures, such as reducing retail availability. Therefore, smoking cessation support and pro-equity measures should be prioritised, especially for disadvantaged groups, while assessing the impact of strengthened regulation and law enforcement measures on Australia’s ITT.