The European Union's top court has ruled that individuals must pay domestic customs duties when buying alcohol from another member state and having it delivered to their home.
In a landmark decision, the European Court of Justice (ECJ) upheld a 1992 EU rule that duty is charged only in the member state where goods are bought for personal use - but only if transported by the purchaser.
ECJ judges
The ECJ judges ruled that "only products acquired and transported personally by private individuals are exempt from excise duty in the member state of importation".
The ruling goes against the opinion of an adviser to the court, who had suggested individuals be allowed to buy alcohol in another country, have it delivered to their home and pay the duty only of the country where the alcohol was bought.
Levels of excise duty vary widely in Europe, with Ireland levying among the highest rates for alcohol and cigarettes in the EU.
For example, the Government levies €2.1 on a 750ml bottle of wine, while 13 EU states charge no excise duty on the same product. High VAT on tobacco products in the Republic also means that 100 cigarettes can cost several times more than the same amount of tobacco bought in Latvia or Poland.
The ruling will come as a relief to cash-conscious finance ministries in about nine EU states, who had been awaiting the decision to see what impact it could have on revenues. In Ireland the Government collected €1.038 billion excise on alcohol and €1.080 billion on tobacco in 2005.
Dermott Jewell of the Consumers Association of Ireland said the decision is a huge disappointment to Irish shoppers already paying some of the highest prices in Europe for alcohol and cigarettes
"It will come as a disappointment to most consumers but it's not a huge surprise, for a number of reasons," he said. "It would have had a major effect on the income and taxation status of a number of member states and maybe more importantly than any lobbying by government ministers, the judges would have been directed by the effects on health of opening the market to alcohol and cigarettes."
But Mr Jewell said the failed legal bid was only the opening salvo in a battle to lower prices for consumers. "This challenge has highlighted how high prices in Ireland are and how significant the tax take is. I would not be surprised if this is only the first challenge of its type," he said. "There's going to come pressure from some quarters in the years to come to ease taxation."
Fianna Fáil MEP for Munster Brian Crowley welcomed the ECJ decision. "The European Court of Justice has got the balance right here today between protecting an individual's right to bring alcohol from one member state to their home state once it is for their personal use and once they transport these goods themselves and the right of member states to generate tax revenues from the importation of alcohol products from one EU member state to another," he said.
The case was brought to court by a Dutch wine enthusiast who set up a group to buy duty-paid French wine for delivery to members in the Netherlands for their own use. The Netherlands imposed excise duty, even though French taxes were already paid, as third-party transport was involved.
The wine circle appealed against the Dutch tax, and ECJ advocate-general Francis Jacobs recommended that individuals importing wine for their personal use should only pay the duty of the country where it was purchased.
If a group was importing the wine, then home country duty should be paid, minus the duty paid in the country where the wine was bought, Mr Jacobs said in his opinion.