Majestic warns of massive tax losses if Europe allows online duty-free shopping

The prospect of online booze cruises if Europe's top court rules that British shoppers can import alcohol from the Continent without paying UK duty yesterday prompted Majestic Wine to call for "tax equalisation" across Europe.

Tim How, the wine warehouse retailer's chief executive, warned that the Exchequer risked being left with a £16bn hole in its coffers if the European Court of Justice backs duty-free shopping across borders.

"It would create a totally uneven playing field. It could have quite an effect on the whole of the UK drinks industry. We're talking about billions of pounds of tax losses for the Exchequer, which could have a serious impact on the UK economy," Mr How said.

UK shoppers pay £1.29 in duty on every bottle of wine, regardless of its price. This hits the cheapest wines the hardest. An ECJ ruling, expected on 23 November, is likely to allow shoppers to avoid paying that by ordering beer, wine and tobacco online from EU countries.

Mr How said Majestic would be better placed than rivals to cope because it already has three outlets in France pitched at UK booze cruisers. The French-based Wine and Beer World chain, which has suffered from the drop in the number of day-trippers, could ship cases to British shoppers, he added. "What the cost would be, I don't know."

He was speaking as Majestic unveiled a 17 per cent increase in interim profits before tax to £6.5m on sales up £7.6m to £88.3m. The group announced plans to buy back up to £20m of its shares over the next few months, lifting the stock 9.25p to 323.75p.

Demand for lighter wines, such as sauvignon blanc from New Zealand, and a new breed of less heavy Spanish riojas, helped to lift its sales. In the past five weeks like-for-like sales are up 4.3 per cent, roughly in line with the first half once the boost from a late Easter is excluded from the figures.

The group expects to open nine new stores during this financial year, lifting its total to 136 by March 2007. Customers, who have to buy cases in batches of 12 but can mix up their order, spent £121 on average, up from £115. The group's emphasis on fine wines, priced at £30 and above, is helping to drive both this and the average price of a bottle of wine higher.