With federal and provincial deficits and debt continuing to grow, governments will be tempted to hike taxes on 'sin' goods such as tobacco, cannabis, and vaping products. This would be a mistake, because tax increases on such goods would  likely result in significant negative outcomes for society. Efficient taxation policy should be based on the pillars of minimizing underground markets, acknowledging the correlation in demand between sin goods, embracing the principle of harm reduction, and implementing policies that reduce participation by youths.In a recent study, which I conducted for the Canadian Chamber of Commerce, I find that the steady rise in federal and provincial cigarette taxes over the past decade has not resulted in substantial increases in government revenues, which may be linked to the growth of illegal markets along with involvement by organized crime. Reducing the price differential between legal and illegal products is critical to stimulate relatively greater demand for legal tobacco and possibly increase tax revenues. Therefore, federal and provincial governments should carefully evaluate the magnitude of illegal markets before setting tobacco taxes and determine whether such tax increases have the potential to increase contraband activity. There is growing evidence of significant illegal markets of contraband tobacco along with the presence of organized crime networks in British Columbia and Ontario. Both federal and provincial governments must adapt stricter enforcement measures to curb the underground market and especially learn from the successful enforcement strategies employed by Quebec. Governments should also invest in awareness campaigns that raise awareness that consuming illicit tobacco is illegal and encourages the growth of organized crime involvement.The above strategies to minimize the growth of illegal tobacco markets should be harmonized with taxation strategy on vaping products. While taxes on tobacco should be set to reduce the price gap between legal and illegal tobacco, they must remain high enough to increase the attractiveness of vaping to smokers interested in quitting. Resources should be devoted towards the use of vaping as a pillar for harm reduction, and public health agencies in Canada should take a close look at the success of vaping in this respect, as reported by Public Health England. In terms of specific policies, federal and provincial governments should not impose any further taxes on e-liquid as long as contraband tobacco is easily accessible. Effort must also be made to reduce the attractiveness of vaping to teens. As is the case in the U.K., sale of vaping products to individuals aged under 18 should be prohibited. Age checks must be enforced at points of sale, with fines imposed on retailers who sell to minors. Further, advertising glamorizing vaping should not be permitted, and governments might consider social media campaigns with popular influencers to highlight the dangers of nicotine consumption and addiction from vaping. Flavours that are obviously attractive to teens should not be permitted.With respect to cannabis, governments should not only curb growth in taxes but go a step further and reduce federal and provincial taxes and harmonize tax rates across provinces to stop the growth of flourishing illegal markets that are evident across the country. Alberta, Ontario, and Saskatchewan should either eliminate or significantly reduce their specific ad valorem sales adjustment taxes. Tax reductions should be considered not only for dried/fresh cannabis but Cannabis 2.0 products as well, which is consistent with harm reduction principles. However, consistent with the recommended approach towards vaping, government resources should be spent on social media public awareness campaigns on the health risks and danger of purchasing contraband cannabis products, especially targeting youth. There should be specific budgeting that provides resources to enforcement agencies to combat the spread of illicit cannabis, in tandem with measures allocated to eradicate underground markets for tobacco and vaping products.Anindya Sen is a Fellow of Canadian Chamber of Commerce's Future of Business Centre, and Professor of Economics, Associate Director of the Cybersecurity & Privacy Institute, and Director of the Master of Public Service at the University of Waterloo.