Leading article: An acceptable compromise

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The Independent Online

So the booze cruise continues. The European Court of Justice yesterday rejected a legal bid to allow online shoppers to bypass domestic excise duty on alcohol and cigarettes. In other words, those who hoped to order wines from France, or tobacco from Latvia, at rock-bottom prices over the internet will have to think again. To take advantage of lower tax rates on such products in other EU states, we will still have to go abroad and buy them in person.

To the Treasury this is a "victory for common sense". It is hardly surprising that the Chancellor, Gordon Brown, is relieved. Taxes on cigarettes and alcohol contribute £16bn a year to the budget. The exchequer already loses £1bn a year due to such shopping trips abroad. But is this ruling common sense as far as EU citizens are concerned?

In one glaring respect, it is not. The present situation penalises those EU citizens who do not live close to international borders. If the power of the web enables them to level the playing field, why should they not be allowed to use it? Moreover, such restrictions sit uneasily with the basic principle of the single market.

But, on the other hand, it is in the interests of EU citizens that their own nation states should have leeway to set their own tax rates. Different nations are entitled to set different social priorities. If countries wish to protect public health through punitive duties on cigarettes and alcohol, that is their prerogative. We should also bear in mind that competition in corporation tax rates has been good for the EU in recent years.

Yesterday's judgment is a respectable compromise under the circumstances. The directive that established the single market made clear that any lingering excise duties should, in general, be chargeable in the EU country of final destination, although there was an exception for products acquired abroad by private individuals for their own use. It is reasonable for the court to argue that this exception should not be widened. This does prolong a slight impediment to free trade; but, for now, it is a tolerable one.

Yet the arrangement cannot continue indefinitely. Political pressure to lift restrictions is mounting. The European Commission called yesterday's ruling a "retrograde step" and is already proposing amendments to revise the legislation governing the single market. Popular pressure is on the rise, too. As the single market matures and communications technology become increasingly sophisticated, different duty rates will grow more and more unpopular. One way or another, differentials will have to come down. One day the booze cruise will come to an end.