After Tony Blair's joint statement on the issue with the German Chancellor, Gerhard Schroeder, Mr Hague claimed during question time that the Government was misleading people over its intentions to harmonise corporate taxation, saying: "Every time you meet a German you go round saying, `Don't mention the tax harmonisation'. This letter is yet another example of giving one impression in Europe and another in the UK."
Mr Hague said the phrase "harmonisation" had been replaced by "co-ordination" to appease the public and it was clear that other taxes, such as indirect taxes, were lined up for such co-ordination.
Mr Blair accused the Tory leader of having given into the Eurosceptics in his increasingly "anti-European party". Pledging that the Government would not return to the "days of Tory diplomacy that left this country without influence at the margins of Europe", he said: "We will oppose any measure at all that is against Britain's interest, whether on taxes or in any other field."
But Mr Hague said: "After all the bluster we've had from this Government about harmonising European taxes is it not amazing that the letter which you signed with the German Chancellor fails to rule out the harmonisation of capital taxes?
"Is it not the latest attempt to cover up the threat of tax harmonisation with meaningless reassurances and waffle?"
Mr Hague went on to argue Germany was clearly hoping for progress towards harmonising taxes at this week's Vienna summit. "There is nothing anti- European about believing we should decide our taxes here in the House of Commons. The truth is that you now have to ask the Germans to use a different word about this subject," he said.
Pointing to the opposition of several other EU states to tax harmonisation, Mr Blair said that the only government that had agreed to harmonise taxes in the UK was the previous Conservative government.
He added, during rowdy exchanges: "We have no intention of agreeing to raising taxes across Europe. We actually want a lower tax burden on our people. But the way to get this argument through is to win the argument by staying firm and engaged, not by glorying in it as the Conservative Party are doing as an excuse to indulge their anti-Europeanism."
To Tory cheers, Mr Hague replied: "Nothing you've done remotely resembles standing firm! If you won't tell the House what is being negotiated, we will, because we've got the list here.
"The shipping tax relief, that you voted for. The film tax relief, that you introduced. The enterprise zones, that your constituents work in. These are currently being negotiated.
"No wonder the European tax commissioner says that the Government is fully on board with tax harmonisation.
"Isn't your endless habit of saying one thing to one audience and another to another finally catching up with you?"
Mr Blair repeated it had been a Conservative government that had agreed to tax harmonisation and abolished duty free. He added: "You have given in to the Eurosceptic wing of your party, who are now running your policy ... It is actually in the British national interest to make sure we win arguments in Europe, not use arguments as an excuse for turning our back on Europe."Reuse content