The European Court of Justice is about to hand down a tax ruling that could change Britain’s booze-buying habits forever.

Next week’s ruling may also create huge problems for the UK Treasury, which relies on drink and tobacco taxation to the tune of £15bn a year.

On 23 November the ECJ is expected to rule that goods bought in other EU states and sent across borders may only be taxed in their country of origin.

In other words, cases of wine bought on the internet and sent from France to Britain would only be taxed at the French rate – less than 2p per bottle. Currently a bottle of wine sent to Britain is taxed at £1.29 per 75cl bottle. Our rates on wine and spirits – and tobacco – are some of the highest in Europe.

At present buyers have to physically accompany their purchases in order to avoid being taxed in their destination country.

If the ruling goes ahead it will have seismic implications for the UK government’s finances. Earnings from alcohol and tobacco taxes are enough to run three major government departments. This revenue stream would be decimated.

It will also have massive implications for internet shopping, with wine merchants based in mainland Europe jumping to supply telephone sales and internet services.

One merchant, who owns a Calais Oddbins franchise, said he would be setting a web sales business as soon as possible.

The European Court’s advocate general has already ruled, in a case involving Dutch shoppers sending wine home from France, that Dutch authorities were wrong to levy tax on the wine when it arrived in Holland.

It is this case the the ECJ is expected to rubber-stamp next week. Legal and tax advisors suggest it is likely to be ratified, even though European – including the UK’s – governments have urged the court to reject the adjudication.

Ernst and Young director Charles Meechan told the Sunday Telegraph, ‘All the evidence is that the ruling will not go the UK’s way.’

Jeremy Beadles, chief executive of the UK’s Wine and Spirits Trade Association, said the ruling would ‘present a serious challenge to the trade’ because of our heavy tax burden.

He said that lobbying for harmonisation of tax across the EU would be on the WSTA agenda. ‘We are all for free trade but for that we need a level playing field,’ he told decanter.com.

What the ruling does mean, Beadles said, is that ‘there will certainly be greater access to cheaper wine’ across the EU.

He also counselled caution. ‘Remember, this is all supposition at the moment. And whatever happens it is going to be a good deal more complicated than the media portrays it.’

See also:

Softer Customs would be ‘devastating’ to UK drinks industry

Treasury condemns EU booze plans

Decanter sets precedent in landmark taxation case

Bonded warehouse ruined as UK Customs probed [updated 3 Dec]

Booze cruisers win right to shop with impunity

WSA calls on ‘harassing’ government to slash drinks duty

Channel shoppers win judgement

British woman branded smuggler against UK Customs

Written by Adam Lechmere