If Sweden is to reduce the amount of alcohol being bought in other countries and privately imported back over its borders it will have to reduce taxes on alcohol by 50%, the Swedish Research Institute of Trade (HUI) has said.

A tax cut of that magnitude would see sales in alcohol by Sweden's state alcohol retailing monopoly Systembolaget increase 37%. Unregistered consumption would fall 47%, HUI said, while total alcohol consumption is expected to rise by 5%.

Sweden is currently being taken to the European Court of Justice over its long-running dispute with the European Commission about restrictions on travellers personally importing alcohol from other European Union member countries.

Brussels wants Sweden to remove a ban on Swedish consumers using independent intermediaries to import alcoholic drinks. It claims this is "a disproportionate obstacle to the free movement of goods", breaking Sweden's EU treaty commitments.

Systembolaget has been seeing a fall in sales since last year when Denmark cut its alcohol tax by 47%. Finland then trimmed its taxes by 40% on 1 March 2004.