Plans to move towards more even pricing of beer and wine in the European Union by increasing beer and wine duties in Spain and Germany and lowering them in the UK have been abandoned after internal opposition to the proposals within the European Commission.

Officials within the Commission's single market directorate had begun work on proposals to align duties across Europe. The plans would have meant a rise in beer duties of more than 17% in Germany and Spain in 2003, with complementary reductions in the UK over a longer period. However, a majority of commissioners have said they are opposed to the plans.

"There was a general feeling that the idea would be unpopular and do more harm than good," an EC official was quoted as saying. "It would have put up prices in several countries which also produce wine, hitting consumers and producers at the same time. And it would do little to stop abuses like smuggling."

The rejection of the scheme virtually before any formal proposals had been drafted underlines how difficult it will be for the European Union to align its disparate levels of alcohol taxation. As it stands, the Single Market legislation agreed in 1992 only sets a minimum level of alcohol duty, allowing governments to retain high levels or even increase them.

There is strong opposition from the alcohol industry, which has powerful political lobbies, to any increase in duties in low tax countries, and governments in high tax countries are not prepared to risk dropping duties by the large steps necessary for harmonisation because of the feared negative impact on tax revenues.

While the disparity creates opportunities for perfectly legitimate cross-border shopping, it also provides precisely the right conditions for smuggling to prosper, for example between continental Europe and the UK.

The harmonisation of indirect taxation was one of the key guiding principles behind the formation of the Single Market. Some adjustments have been made in the UK, principally by freezing duties rather than raising them in annual budgets, and rates have gone down in Sweden and Finland since they joined the EU. But significant disparity between duty rates remains, and since 1992 there has in reality been little in the way of political will among member states to tackle the issue.