Drinkers and smokers unite to praise the EU?

I cheerfully admit to welcoming the possibility of cheaper fags and booze, to be brought about by the European Court of Justice. The Guardian reports:

UK shoppers may soon be able to order duty-free alcohol and cigarettes on the internet. The European court of justice will decide this month whether goods from EU countries can be delivered to British homes free of UK duty.
An adviser to the court has backed the change, which could mean a big drop in tax income for the Treasury, which wants the court to reject the advice. The Treasury argues that the way it interprets duty laws is correct.
Francis Jacob, the court's advocate general, gave his suggestions to the court last December and the court will give its verdict on November 23.
If the change goes ahead, shoppers will be able to order alcohol and cigarettes from countries in mainland Europe, where there are often lower alcohol and tobacco duty rates.

Similar stories appear in The Scotsman (here) and The Times (here) - although it is worth noting that the latter believes it will be 1 December before the Court pronounces. But none of the newspapers really explores the implications. What follows assumes that the Court decision is as predicted, a not excessively heroic assumption, but an assumption nonetheless.

The first thought is that this will make a big hole in the Chancellor's income projections. Duty on fags and booze amounts to £15 billion per year. How would Gordon make up a shortfall, even if it were only, say, £4 or £5 billion? Increases in income tax rates? Or VAT? There is a certain irony to the prospect of the clean-living taxpayer being forced to pay extra so that the lotus eaters can indulge themselves smoking and drinking rather more cheaply than heretofore.

Secondly, the retailers - the supermarkets and off-licences - are not going to be particularly happy. They don't care about the level of duty. But they will care if people stop buying fags at £50 per carton from them because they can order them over the internet from Latvia at £10 a carton. The same applies to booze. From their point of view, the obvious answer is to harmonise duty levels throughout the EU, so that there is no advantage to be gained by buying from abroad. But why would Portugal, Greece and Estonia agree to significant increases on duty levels to the disadvantage of their citizens? Is downwards harmonisation acceptable to the UK Government?

Third, we are likely to see the bizarre scenario of whisky being manufactured in Scotland, put into bond, shipped to Portugal or Greece, then sent back to individual customers (like me) at a lower price than I can buy it in my local Tesco supermarket.

Maybe it will never happen, if the Court jumps the wrong way. But if the Court confirms the opinion of the Advocate-General, we can expect some fun and games.