Efforts to ensure that greater tax harmonisation forms a key part of the next EU treaty are being blocked by a coalition including Ireland, Britain and EU applicant states, it has emerged.
This latest debate about EU tax rules has arisen following a report by a key committee of the Convention on the Future of Europe, which is set to produce a new draft EU treaty.
The convention's Economic Governance Committee has been unable to agree on any extension of the EU's powers to dictate the tax structures of individual member states.
Despite the presence of some EU federalists on the committee, its final report has sharply disappointed the convention's leaders: the former French president, Mr Valéry Giscard d'Estaing, and vice-chairmen, former Italian prime minister, Mr Giuliano Amato, and former Belgian premier, Mr Jean-Luc Dehaene.
Mr Amato, supported by Mr Giscard d'Estaing, effectively issued a dressing-down to the chairman of the committee, Germany's Mr Klaus Hansch, by accusing the body of displaying "a lack of ambition".
Moreover, the German chairman has come under pressure to produce a minority report recommending common EU tax rates in advance of a meeting of the convention on Thursday.
The opposition within the economic committee came principally from delegates from Ireland, the UK, Sweden, Finland, and EU candidate countries.
"Everybody had their own reasons for what they did. The Swedes have high tax rates and don't want anybody telling them that they cannot have them," said one source.
"The applicant countries don't want their competitiveness hurt. Neither does the UK, or the Republic. Even the Italians and the Spaniards had their own reasons."
Ireland's representatives on the Economic Governance Committee are former Taoiseach, Mr John Bruton, and Fianna Fáil Dublin North West TD, Mr Pat Carey, who replaced Mr Ray MacSharry.
Acknowledging that full agreement could not be reached, the committee's final report, however, says that "a majority of members" agreed some changes should be made to existing rules. Denying they favoured unified personal or property taxes, the pro-harmonisation group said that minimum indirect and corporation tax levels were needed to ensure the EU was not hurt by harmful tax competition or serious trade distortions.
The 210-strong full convention, including alternate members, is attempting to produce a new draft EU treaty by next summer which would simplify the existing web of treaties and grant greater powers to national parliaments.
The convention's final text would then be debated by an inter-governmental conference, though it is clear that its final recommendations would carry considerable political weight.
The full convention includes representatives from all 15 EU governments, along with each of the EU's national parliaments, the European Parliament, the European Commission and 13 representatives from each of the countries queuing to join the European Union.
Illustrating the divisions within the economic committee, its final report acknowledges that "some members" had emphasised the need to promote sustainable growth and employment, while "others attach more importance" to full employment, social cohesion and some protection for public services.
Accepting that the European Central Bank should retain exclusive control of monetary policy, the committee, however, agreed that there "is a need for improved co-ordination between the economic policies of the member states".
But the committee was divided on how countries in breach of the Growth and Stability Pact rules should be disciplined.
The more pro-federalist camp had sought a greater role for the European Commission, while opponents favoured leaving the issue in the hands of EU finance ministers.
