Google has been criticised for not paying UK corporation tax on the £16bn revenues it generates from the market.
According to reports, Google is avoiding paying HM Revenue & Customs a tax bill of as much as £450m.
The issue of Google and other large firms such as Microsoft and Tesco avoiding tax through tactical inter-company pricing arrangements has been questioned in the past, but Vince Cable, deputy leader of the Liberal Democrats, has now warned Google that its reputation will suffer if it does not pay up.
"Avoidance like this is hard to stomach at the best of times, but when the country is in recession and everyone is feeling the pain, it really sticks in the throat. It means higher taxes for the rest of us," Cable told The Sunday Times.
"Google's reputation will be severely damaged if it continues to behave in this way. It is ducking its social responsibility."
Google acts perfectly legally in not registering the revenue with its Google UK Limited subsidiary, but with its Ireland division.
This allows the company to pay the Irish corporation tax rate of 10 to 25 per cent, rather than the UK rate of 28 to 30 per cent.
Google could not immediately be reached for comment.
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