Conservative claims that the EU is moving to harmonise tax across Europe have been dealt a blow by the European commission prompting the accusation that the Tories are scaremongering on Europe.

The commission says the proposals under discussion fall short of the full tax harmonisation the Tories claim is on the agenda.

A commission spokesman said: "The Tory claims on taxes are nothing but scaremongering. They are trying to suggest that income taxes, petrol taxes, VAT and every other tax will soar under Labour and thanks to Europe."

Frits Bolkestein, the internal market commissioner responsible for EU taxation issues said: "The document clearly states that there is no need for the harmonisation of national tax systems."

EU commissioners said they have discussed plans, branded by the Conservatives as "secret", to "improve the operation of the single market". These included suggestions to narrow gaps between national VAT rates - but stopped well short of total tax harmonisation.

"While a large measure of harmonisation is necessary in the VAT and excises fields, in other tax fields tax co-ordination does not imply tax harmonisation," said the commission on Wednesday.

Commission insiders say that proposals to harmonise tobacco and alcohol duties in a bid to counter smuggling and racketeering will not hit the UK which has far higher rates of excise.

Critics of the Conservatives' claims say sectors hit by smuggling, such as tobacco retail, may benefit from harmonisation.

On fuel tax, the EU minimum of 18 pence a litre was introduced with Conservative support in 1992. The commission proposes a raise to 31 pence, well under the 48 pence currently paid in the UK.

Bolkestein says tax competition is preferable to single EU tax rates.

"A reasonable degree of tax competition within the EU is healthy and should be permitted. The commission intends to focus more attention in particular on the tax problems facing individuals and businesses operating within the internal market," the commission said.

Bolkestein argues that "that efforts must be made to achieve a durable reduction in the overall tax burden in the EU, by ensuring a balance between cutting taxes, investing in public services and sustaining fiscal consolidation". He specifically ruled out harmonisation on income tax.

"There is no intention to harmonise income taxes," he said.

Future proposals on VAT would be subject to veto and require the unanimous agreement of all member states.

Labour has said that it has no plans to give up its veto in this area and attacked the Conservatives on VAT.

"We know the Tories are addicted to VAT. Every Tory government has extended VAT. It was Michael Portillo in government who proposed putting VAT on fuel and both William Hague and Michael Portillo are on the record supporting the extension of VAT," said Alistair Darling.

On the issue of company taxation, Brussels has said "the commission does not advocate harmonisation of company taxation".