Robin Wilton's esoterica

One of the cornerstones of the European Union (and its previous incarnation, the European Economic Community [1957-1992]) is the creation of a "single market for the free trade of goods and services among member states".

Under those circumstances you might wonder why the transport of goods across borders between member states should attract any kind of duty, tax or impost. But it does.

If I drive to France and fill the car boot with wine (paying the normal French retail excise duty on each bottle), then I am exempt from paying UK duty on the same wine when I bring it back to the UK... provided the wine is for my own personal consumption only. Obviously, if I plan to bring it back and re-sell it to take advantage of the difference in duty rates, that's another matter.

However, if I order the same wine from France, but instead of driving over to collect it myself, arrange to have it couriered to me, then (according to today's ruling from the European Court of Justice) it no longer qualifies for the same exemption, and I become liable for UK import duty.

Setting aside the slightly strange logic of this ruling, it's interesting to note that UK duty on wine is a highly regressive form of taxation; that is, it is likely to place a proportionally greater burden on those with lower incomes.

The Chancellor currently levies a fixed rate of £1.29 on each bottle of wine sold retail in the UK.

That means that if all your budget runs to is Tesco's screw-top Lambrusco at £1.42 a bottle, you are being taxed at a rate of over 90% of the purchase price. On the other hand, if you can afford a 2004 Barbera d'Alba from Berry Bros. and Rudd at £18.45, the tax represents only 7% of the purchase price.

The whole issue of duty rates on alcohol, tobacco and petrol has always mystified me. Amongst the arguments mustered in favour of the ECJ's ruling come the following:

- the national spokesman for Retailers Against Smuggling said "Tobacco accounts for a huge proportion of the sales of many corner shopkeepers and to have lost these valuable sales plus the add-on purchases a shopper often makes at the same time ... would have been unsustainable for many retailers";

- and if the ECJ ruling had gone the other way, it would apparently have led to a reduction in tax revenue of some £16bn for the UK exchequer. The current volume of 'booze cruise' traffic (that is, consumers who travel to the continent specifically to load up at non-UK excise rates) already costs the Chancellor over £1bn in lost tax.

So the government actually cannot afford for us all to give up drinking... or smoking... or using our petrol-engined cars. Indeed, it has a perverse financial incentive for encouraging us to do all of these things, because of the "double whammy" if we stop: lost tax revenue and a substantial hit to the retail sector.

Health Secretary Patricia Hewitt was questioned yesterday as part of the police investigation into 'cash for honours' allegations - though reports are quick to add that she was questioned "as a witness, not a suspect, and was not cautioned."

Nevertheless, as you will probably remember from my recent post, as a witness, she could be invited to provide a DNA sample which would then be permanently recorded on the national police database.

I wonder if they asked her? Anyone fancy submitting an FoI request?