The Commission offered the suggestion in part because of an avalanche of complaints from car buyers who pay a tax when they purchase a car in one country, only to find themselves slapped with a second tax when they take their cars to other countries.

"I am determined to tackle the tax obstacles individual citizens and car manufacturers face within the internal market arising from 15 different systems of car taxation within the EU," said Taxation Commissioner Frits Bolkestein in a statement.

The Commission said 10 of the EU's 15 states tax new and used cars when they are purchased, ranging from a modest 267 euros in Italy to an astronomical 15,659 in Denmark. It suggested phasing out the fees over five to 10 years.

AUTO INDUSTRY DAMAGED

The existing system hurts the automobile industry, which responds to the wide differences in taxes by fiddling with horsepower and the use of diesel engines to minimise differences in the automobile showroom, the Commission said.

The lack of standardisation has "a negative impact on their ability to achieve the potential benefits of operating within an internal market," the Commission said of the car manufacturers.

The Commission said all states except France, which has high charges for toll roads, levy an annual road tax. This ranges from 30 euros a year in Italy to 463 euros a year in Denmark.

"The Commision recommends that member states should bring their annual road taxes closer together," it said.

One possibility would be to increase the taxes in order to make up for the loss of revenue from taxing car sales.

The Commission suggested countries could link their taxes to carbon dioxide emissions, which damage the environment by creating a greenhouse effect. Cars which use more fuel and produce more carbon dioxide would pay more.

In particular, countries should examine existing generous tax breaks for company cars, which account for 50 percent of new car sales in Sweden, 42 percent in Germany, 45 percent in the Netherlands and more than one third in Britain and Finland, the Commission said.

"Taxation of company cars should also include a clear and strong incentive to use more CO2 efficent cars," it said.

The Commission will wait for comment from the public, governments and industry before setting a timetable for additional action.