Norway's three-week-old centre-right government has proposed a reduction in taxes on alcohol in its draft budget, presented last week, in an effort to combat the black market.

The measures included a 15% reduction of duty on spirits and a 5% tax break on wine and beer. Effectively this means a bottle of liquor bought from the state run wine monopoly will be approximately NOK40 cheaper (US$4.10) and a bottle of wine will be NOK2.00 cheaper.

A statement from the Norwegian Wine and Spirits Importers Association (VBF) said: "By reducing the duty on alcohol the Government hopes to halt the smuggling and ever-increasing border trade with Sweden and Denmark."

But the VBF continued that the duty reductions proposed by the Government were too small to make any impact on the border trade.

"On December 1, the wine taxes in Sweden will fall by almost 19%, putting Norway's state liquor stores at a greater competitive disadvantage. Norwegian sales in the Swedish town of Strömstad, for example, are already running 60% ahead of last year and according to official (sic) more than 50% of the total consumption of liquor are unrecorded."

The Government will need support from the right-wing Progress Party to get the budget approved by the Parliament. The budget negotiations between the Government parties and the Progress Party are to be concluded before November 20th.

The financial spokeswoman for the Progress Party Siv Jensen said in the Norwegian newspaper Verdens Gang that she intends to fight for the highest possible reduction of duty on alcohol in the budget negotiations.