At first sight, the dispute hangs on the interpretation of a directive drafted by civil servants and ministers from Brussels and the European Union's 12 national capitals in 1992. Are goods 'acquired by private individuals for their own use and transported by them' if they order by telephone, pay by credit card, and receive the goods by courier delivery - or not? It will be up to the European Court of Justice to decide which view is right. But there is a lesson in the dispute for all the governments of the Union.
When the single European market was first mooted, wise observers argued that the free movement of people, capital, goods and services would force countries to bring their duty regimes into line. European finance ministers disagreed. They would have a borderless market; but to allow some countries to maintain much higher duties than others, only personal shipments of alcohol and cigarettes from low- duty to high-duty countries would be allowed. National duty regimes would thus remain intact.
So far, only 5 per cent or so of Britain's tobacco and alcohol sales have migrated to France. But whatever the fate of the Commission's new loophole, this cannot be a permanent solution. The traffic has already reached pounds 400m a year. The opening of the Channel tunnel - and the parallel growth of air traffic - will increase it still further.
Closing the loophole for good would require the partial reinstatement of border controls. Yet it is in the European Union's interests to do the opposite: to create a mail order market like that of the US, where consumers can use 800 numbers to order anything from flowers to computers from a supplier 1,000 miles away. Holding back the growth of this cross-border mail order will make the entire Union poorer.
Bringing EU duties into balance must therefore be speeded up. Britain should argue strongly to its European partners the merits of low income taxes and high duties on alcohol and tobacco. But if the other governments are not convinced, pressure will mount on the UK government to cut duties on alcohol and tobacco at home.Reuse content