Sweden has been told by the European Commission to end its favourable tax treatment of beer compared to wine or face legal action at the European Court of Justice.

Under the Swedish alcohol tax regime, wine in the 8.5-15% abv band bears tax at about four times the rate of beer in the 3-5% range, even though it has only three times as much alcohol.

The Commission argues that this violates EU treaty rules barring Member States from imposing higher taxes on products from other countries than on competing domestic products. Sweden is not one of the world's natural wine producing nations but does produce beer domestically.

Brussels notes that the ECJ has several times ruled that beer and table wine are competing products.

Sweden has two months to reply to the Commission's "reasoned opinion." Frits Bolkestein, Commisioner for taxation, said that the tax system "may be a more subtle way to defend domestic production than import quotas or tariffs, but the effect is the same illegal protection."