Tax harmonisation on the agenda for EU working party Â

An inquiry into the future of Europe will announce plans today to prepare the ground for a sharp acceleration of economic co-ordination by the eurozone countries that could lead to tax harmonisation.

The European Convention, chaired by the former French president Valéry Giscard D'Estaing, will appoint working groups to tackle the EU's most pressing problems.

One of the six committees will focus on how to improve co-operation between the 12 countries that have adopted the single currency. It will examine whether there should be more powers to force countries to meet guidelines, and whether tax policy should be harmonised among the 12.

Britain, Denmark and Sweden will be alarmed at the inquiry's terms of reference because they could lead to the current, informal gathering of the finance ministers of the eurozone nations, known as the eurogroup, becoming more powerful. One proposal to be considered is to give the eurogroup the power to take formal decisions.

The idea has been resisted fiercely by the UK, which is concerned that it will be relegated to the sidelines. The three countries also fear they will be left in a second tier with the countries that are about to join the EU and will not qualify for the euro in the short-term. Another issue to be examined is whether the 12 eurozone countries should be represented by one voice on bodies such as the International Monetary Fund.

The senior German MEP Klaus Hänsch, will chair the economic co-ordination committee, and is likely to pave the way for far-reaching changes.

Overall, Mr Giscard D'Estaing's convention is designed to help prepare the EU for the effects of enlargement with the admission of as many as 10 new countries as soon as 2004. One of its main functions is to prevent bureaucratic paralysis and to simplify a decision-making process that is fiendishly complicated. Although the 15 EU heads of government will make the final decisions, the convention is likely to have a big impact on their thinking.

A separate working group will raise the possibility of an important change in the power structure in Brussels: the end of the system whereby the European Commission plays a limited role in foreign policy and justice and home affairs. On Wednesday, the European Commission called for sweeping powers, a move welcomed by MEPs represented on the 105-strong convention. However, the key military powers, Britain and France, are unlikely to cede control over security and defence issue which, at present, must be decided unanimously. "What would the commission do in a security crisis," said a source close to the convention yesterday, "pass a directive?"

Some of the convention's work will, however, be more welcome to Britain and other nations that favour an inter-governmental approach. One group will study how to devolve responsibility back to the member states. Another will look at the role of national parliaments.

*If you are aged from 18 to 25 on 9 July you can take part in the first substantial inquiry into the future of Europe for almost five decades.

Three winners of an open essay competition, run by The Independent, will meet counterparts from the 15 member states of the EU and from the 13 nations applying to join, for a debate in the European Parliament in Brussels.

You should submit a 400-word essay on your vision of the future priorities and structures of the EU to: convention@independent.co.uk no later than 27 May.

The committees who is studying what

Inigo Mendez de Vigo (Spanish MEP). Will study "subsidiarity", the idea that power should be devolved to the most local level possible. Likely to examine the role of regional government.

Antonio Vitorino (Portugese European Commissioner). Will study the future role of the Charter of Fundamental Rights, which many would like to use as the basis for a European constitution.

Giuliano Amato (Italian former prime minister and vice-president of the convention). Will look at the issue of the "legal entity" of the EU. Could mean an end to the structure whereby two areas, foreign affairs and justice and home affairs, are the preserve of member states and not the European Commission.

Klaus Hänsch (German MEP). Will take on economic co-ordination and plans to boost co-operation among the euro countries.

Henning Christophersen (Danish former European Commissioner). Will examine grey areas (such as transport) where the EU technically has few powers but where there is pressure to act at a pan-European level.

Gisela Stuart (UK former minister). Will look at the role of national parliaments in the life and decision-making process of the EU, and at possibly ways of increasing MPs' scrutiny of EU legislation.