Google row: Lord Lawson calls for corporate tax reform

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Image captionLord Lawson described corporation tax as "profoundly unsatisfactory"

Lord Lawson has called for radical reform of how big companies are taxed, in response to the row about Google's arrangements in the UK.

The former Conservative chancellor told theDaily Telegraph corporation tax "has had its day" and should be replaced with a tax on sales.

It comes after an agreement for Google to pay £130m in tax dating back to 2005 was condemned as "derisory" by critics.

The government and HMRC have both defended the deal.

Labour has called for the public spending watchdog, the National Audit Office, to investigate what it criticised as a "sweetheart deal".

'Grossly unfair'

Lord Lawson told the Telegraph: "It is profoundly unsatisfactory that corporation tax has to be collected from large multinational corporations by a series of ad hoc compromise deals, as we have once again seen with the Google affair.

"It is also grossly unfair on smaller businesses, who are unable to shift profits between tax jurisdictions and have to pay the full amount due under UK law."

Google tax row: What's behind the deal?

Google's tax agreement came after years of criticism of it and other multinational firms over their tax arrangements in the UK and across Europe.

The payment by Google, praised by Chancellor George Osborne as a "victory" for the government, covered money owed since 2005 and followed a six-year inquiry by HMRC.

Lord Lawson said the arrangement showed corporation tax should be replaced with "a much lesser tax, bolstered by a tax on corporate sales.