This article aims to describe the major ethical issues surrounding tobacco taxation, and to identify policy responses to minimise any ethical dilemmas. It uses the standard ethical framework for biomedicine (covering beneficence, non-maleficence, respect for autonomy and justice), in conjunction with relevant data on tobacco taxation from various developed countries. Tobacco taxation contributes substantial benefits at the population level by protecting health (i.e., by deterring the uptake of smoking by youth, by promoting quitting, and by reducing harm from exposure to second-hand smoke (SHS)). However, tobacco taxes can contribute to financial hardship among low-socioeconomic status populations where smoking persists. Such taxes can contribute to autonomy, by reducing SHS exposure to non-smokers, and by allowing freedom from nicotine-dependency for those who quit smoking or do not start regular smoking as a result of high tobacco prices. Furthermore, increases in tobacco taxation may reduce health inequalities and so contribute to justice. Nevertheless, the additional tax burden imposed on smokers who wish to continue to smoke, or are unable to quit, can be considered unjust. The autonomy of such smokers may be partly impaired. Although tobacco tax can be regarded as ethically justifiable because of its substantial overall benefit to society, there is substantial scope for policy changes to further reduce any harms and injustices for those populations who continue to smoke.