The decision constitutes a victory for Sweden and a rebuff of the European Commission, which had argued that the tax differential amounted to a protectionist measure that induced consumers to choose domestically produced beer over wines imported from other EU member states.
However, the Swedish government has already changed alcohol taxes to meet the Commissions demands in the case.
The difference in taxes did not, according to the Court, persuade consumers to choose Swedish beer instead of imported wine.
The Court agreed with the Swedish government line that the difference between the retail price of a litre of wine and a litre of beer was so large that a small difference in the level of tax applied to the beverages was not enough to cause consumers to choose wine instead.
The case has been ongoing since 1997, but Social Democratic and centre-right governments have maintained that Swedish taxes didn’t disadvantage wine imports to the benefit of Swedish beer.
But last summer, one of the Court’s lawyers asserted in a proposal for a settlement in the case that the Swedish selective purchase tax (punktskatten) was against EU rules.
In the fall, the centre-right government proposed changes to Sweden’s taxation which the Commission and the lawyer felt were more in-line EU rules.
But Minister of Finance Anders Borg claimed that there were other reasons for changing alcohol taxes than the threat of a European court defeat.
One was that the government needed money to pay for the reduction in employment taxes.
“We think that it’s more important to have people working than making it cheap to drink beer,” said Borg at the time, who at the same time, and counter to the logic of his initial statement, also suggested reducing the tax on wine.
Borg went on to explain his reasoning.
“It has to do with the EU-part; its about harmonization. Thus we’ve decided to have a little hike on beer and somewhat lower [taxes] on wine,” he said.
Despite Borg’s choice of words, he was, in the end, suggesting a reduction in the tax on wine.
The Ministry of Finance then said that the tax on a bottle of wine would be 47 öre (8 cents) lower starting in 2008 as compared with 2007. At the same time, taxes on a can of strong beer went up 62 öre.