The European Commission is retreating from its controversial drive to harmonise taxes throughout the union.

In an internal debate today on reorienting its future tax strategy, the Commission will accept that member governments are unlikely to accept large-scale harmonisation for the foreseeable future.

However, company taxation is an area where the Commission may bring forward ambitious proposals for pan-European action to tackle cross-border tax obstacles. Officials are also looking at the effects of big differences in corporation tax rates in member-states.