The thesis describes and analyzes the excise tax on tobacco products and the relevant market in the Czech Republic. Changes of the excise tax on tobacco products in the Czech Republic and their impacts on the public finance, on sales of tobacco products, and on illegal market trading these products are analyzed as well as effects of government regulation on the tobacco products market. The thesis concludes that increasing excise taxes, due to the Peltzman effect, may lead to originally unintended consequences which are in the contradiction to arguments in favor of the tax increase. Distortions on the tobacco products' market make the efficient regulation difficult.