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ECJ: Different tax treatment of beer and wine in Sweden does not infringe Community Law (Case C-167/05)

8 April 2008. The European Court of Justice has dismissed the Commission action against Sweden and considered that different tax treatment of beer and wine in Sweden does not infringe community law.

On 14 April 2005, the European Commission brought an action against Sweden for failure to fulfil its obligations under the second paragraph of Article 90 EC. The Commission believed that the Swedish legislation governing excise duty on alcoholic beverages, which treats beer and wine differently in terms of the excise duty to be applied, was liable to afford indirect protection to beer (mainly produced in Sweden)and to the detriment of wine (mainly imported from other Member States) and was, therefore, contrary to Community law.

The Court has, however, dismissed the Commission action for considering that “given the difference in selling price between a litre of wine and a litre of beer, the difference in excise duty is not liable to influence consumer behaviour.”

In its judgment, the Court points out that wine and beer are, to a certain extent, capable of meeting identical needs, which means that a certain measure of mutual substitutability must be acknowledged. The Court states that the decisive competitive relationship between wine and beer, a popular and widely consumed beverage, must be established by reference to those wines which are the most accessible to the public at large; that is to say, generally speaking, the lightest and least expensive varieties.

Thus, the Court considers that, in the present case, only wines in the intermediate category (with an alcoholic strength of between 8.5% vol. and 15% vol. and a final selling price ranging between SEK 49 and SEK 70) share a sufficient number of characteristics with "strong" beer (which has an alcoholic strength equal to or higher than 3.5% vol.) to represent an alternative choice for the consumer and thus be in competition with strong beer.

On the basis of a comparison of the levels of taxation in relation to alcoholic strength (the most pertinent basis for comparison in the present case), the Court notes that a wine with an alcoholic strength of 12.5% vol. is subject to taxation per percentage of alcohol by volume which is approximately 20% higher per litre than that on the beer with which it is in competition. Wine which is in competition with strong beer is, therefore, subject to higher taxation than that beer.

However, the Court considers that the fact that wine is taxed more heavily is not liable to influence the market in question and does not have the effect of affording indirect protection to Swedish beer. In that regard, the Court points out that the price difference between the two products is virtually the same before taxation as after it (a litre of wine of 12.5% vol. costing just over twice the price of a litre of beer). In that context, the Court concludes that the Commission has not shown that the difference between the price of strong beer and the price of wine in competition with that beer is so slight that the difference in the excise duty applicable to those products in Sweden is likely to influence consumer behaviour.

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The full text of the judgment may be found on the Court's internet site