Conservative politicians who refuse to be more open about their expenses could be thrown out of the party.
Party leader David Cameron also rejected proposals to give MPs a pay rise or a "crazy" daily attendance allowance in place of controversial second-home allowances.
Speaking out as he was forced to defend senior members of his party against sleaze allegations again, he said increased transparency was the only solution.
He said shadow chief secretary Phillip Hammond had not broken any rules over undeclared income from shares as the holdings were publicly registered.
Asked whether he would prevent MEPs who refused to obey his instructions to make more declarations standing as Tory candidates at the next elections, he said: "Theoretically, yes.
"I think that people who travel under a Tory banner, we've got to be clear that we are happy about the way they are behaving and the standards they are upholding.
"We've got to sort out this issue of MEPs' expenses and allowances and have greater transparency and we need everyone to row in the same direction."
Proposals for a shake-up of Commons expenses are due to be published on Wednesday and are believed to include extra cash, a daily attendance allowance or increased scrutiny.
Tory MPs Nicholas and Ann Winterton were rebuked by the Standards and Privileges Committee last week for buying a Westminster flat outright using their ACA, then effectively renting it from themselves, still using the allowance.
Party chairman Caroline Spelman is also under investigation by a Parliamentary sleaze watchdog over her use of public funds to pay a nanny.
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