FINANCE Minister Michael Noonan rejected a proposal for a €15 price tag on cigarettes as he feared it would increase tobacco smuggling.
Health Minister James Reilly had wanted to see a hike in the cost of 20 cigarettes of 65pc within six years as a "shock" tactic.
But his Fine Gael colleague Mr Noonan said the country was already vulnerable to smugglers because of the current price of €9.10, with the exchequer losing €250m a year in revenue from the black market trade.
The cost increase had been part of a range of anti-tobacco measures proposed by Mr Reilly.
The minister plans to ban smoking in cars with children as well as in public places such as parks.
Mr Reilly said in a letter to Mr Noonan that smoking was the greatest single cause of preventable death in Ireland, killing more than 5,000 people every year.
A "compelling case" existed for a significant hike in the cost of cigarettes, he added, proposing a €1 increase in 2012 followed by a similar hike every year for the following five years.
But Mr Noonan pointed out Ireland is already the most expensive country in the EU for smokers, making us attractive to smugglers.
In a parliamentary reply, he revealed data from the Revenue Commissioners estimated 20pc of cigarettes consumed within the State had not been taxed here.
For a 20-a-day smoker, the habit currently costs €276 per month.
In last December's Budget, Mr Noonan increased the excise duty on cigarettes by 25c, raising around €17m for the Exchequer in 2012.
The Irish Cancer Society wanted to see the excise increased by €1 for a packet of 20, raising a potential €68m.
The group pointed to a study in Spain showing that the real cost of cigarettes was €107 for men and €75 for women when resultant medical costs were factored in.
John Mallon of Forest Ireland, a representative group for smokers, recently criticised the proposal to outlaw smoking in cars with children.
"Most responsible parents would not light a cigarette in a car with children present, and I wouldn't condone it myself. But legislating for something that common sense already dictates is a gross over-reaction," he said.
Mr Reilly stated in his letter to Mr Noonan, published in the Sunday Times, that his proposed prices "would send a strong public-health message to all smokers, whereas a once-off annual increase would not be as effective as a 'shock value' tactic".