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EU rules against cheap online alcohol. By Dan Martin

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23rd Nov 2006
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Christmas shoppers hoping to buy cut price alcohol via the internet will be upset today while the Treasury will be breathing a sigh of relief after the EU decided consumers cannot go online to purchase cheap drinks and cigarettes from anywhere in Europe.

In a surprising decision, the European Court of Justice (ECJ) did not follow a previous adjudication from its advocate general which said goods can be bought in one EU state and delivered to another with only the duty in the country of origin having to be paid.

In a statement, the ECJ said: "Only products acquired and transported personally by private individuals are exempt from excise duty in the member state of importation."

Experts had predicted the court would agree with the advocate general leading to claims from UK alcohol and tobacco retailers that their operations would be threatened by an increase in people staying at home to shop online and having goods shipped to their door.

As well as being good news for businesses, the ruling will also be welcomed by the Treasury. The department collects an annual £16bn from alcohol and cigarettes duties. If the ECJ had ruled the other way, it was forecast that the Treasury would have lost up to £10bn a year, equivalent to almost 3p on the basic rate of income tax.

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants, said the decisions means that the traditional "booze cruise" to the continent is safe.

"High tax regime countries – such as Ireland, UK and Scandinavia – will be breathing a sigh of relief at this ruling," he said.

"But as the EU expands, it is vital that governments ensure their tax laws are compliant with EU tax law. But essentially, this ruling is a missed opportunity to create a truly open, free market for individuals. The UK's Treasury’s coffers are safe."

The Liberal Democrats meanwhile welcomed the decision saying that governments should be permitted to set their own individual tax levels. Shadow chancellor, Vince Cable said: "The decision...is a huge relief, not merely because tax revenues faced a possible catastrophic fall, but because it is essential that national governments should be free to set their own tax rates.

"This is particularly true in an area such as this, where the taxation of cigarettes and alcohol should be determined not simply on revenue grounds, but also on the grounds of public health, as excessive consumption leads to large costs for the wider community."

Britain is home to some of highest duties in Europe. In Latvia, a carton of 200 cigarettes costs £7.20, compared to around £51 in the UK, most of which is tax. In addition, many European countries do not impose a levy on wine whereas in Britain shoppers are charged £1.30 per 75cl bottle.

Related link:
Full European Court of Justice decision

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