Business Secretary Vince Cable has condemned corporate tax avoidance as "completely unacceptable", saying there are "appalling stories of abuse".
He told the BBC's Andrew Marr Show UK authorities should do more to stop it.
However, he said that tackling the issue required international agreement as well as domestic action.
His comments came after executives from Starbucks, Google and Amazon were grilled by MPs, although the firms say they operate within the tax rules.
The executives were questioned earlier this month by the Public Accounts Committee about how they used favourable European tax jurisdictions for their UK businesses.
Starbucks, for example, has made a taxable profit only once in its 15 years of operating in the UK. As a consequence, the company is thought to have paid just £8.6m in corporation tax over the period.
During the hearing with MPs, Starbucks admitted the Dutch government had granted a special tax deal on its European headquarters, which receives royalty payments from its UK business.
'Intensive investigation'
Mr Cable told Andrew Marr: "The best off in society have got to contribute more, and that includes companies."
He acknowledged that smaller companies, many of which face competitive pressures from the major firms, will be angered by the situation.
"There's nothing more galling to small and medium-sized enterprises when they are paying (tax), and others are dodging it," Mr Cable said.
"Our own tax authorities have got to be very tough on things like royalty payments, which is where a lot of the subterfuge takes place."
However, he said that finding a solution was difficult, especially as the UK had to make itself attractive to inward investors.
"The big question is whether you can get wider (international) agreement," he said. As companies are using favourable tax jurisdictions overseas there needs to "a combination of action at the international level as well as beef up our own capacity to deal with it".
Mr Cable said: "It is quite difficult to drill down to what the problems are. Starbucks claims they are actually making losses in the UK.
I don't know whether they are not but you would need some pretty intensive investigation by the Inland Revenue to establish what exactly is going on, whether their transfer prices and their royalties are being fiddled or not."
All the companies under fire over the amount of corporation tax paid said that they operated within the tax rules and regulations and have done nothing wrong.
bbc.co.uk
He told the BBC's Andrew Marr Show UK authorities should do more to stop it.
However, he said that tackling the issue required international agreement as well as domestic action.
His comments came after executives from Starbucks, Google and Amazon were grilled by MPs, although the firms say they operate within the tax rules.
The executives were questioned earlier this month by the Public Accounts Committee about how they used favourable European tax jurisdictions for their UK businesses.
Starbucks, for example, has made a taxable profit only once in its 15 years of operating in the UK. As a consequence, the company is thought to have paid just £8.6m in corporation tax over the period.
During the hearing with MPs, Starbucks admitted the Dutch government had granted a special tax deal on its European headquarters, which receives royalty payments from its UK business.
'Intensive investigation'
Mr Cable told Andrew Marr: "The best off in society have got to contribute more, and that includes companies."
He acknowledged that smaller companies, many of which face competitive pressures from the major firms, will be angered by the situation.
"There's nothing more galling to small and medium-sized enterprises when they are paying (tax), and others are dodging it," Mr Cable said.
"Our own tax authorities have got to be very tough on things like royalty payments, which is where a lot of the subterfuge takes place."
However, he said that finding a solution was difficult, especially as the UK had to make itself attractive to inward investors.
"The big question is whether you can get wider (international) agreement," he said. As companies are using favourable tax jurisdictions overseas there needs to "a combination of action at the international level as well as beef up our own capacity to deal with it".
Mr Cable said: "It is quite difficult to drill down to what the problems are. Starbucks claims they are actually making losses in the UK.
I don't know whether they are not but you would need some pretty intensive investigation by the Inland Revenue to establish what exactly is going on, whether their transfer prices and their royalties are being fiddled or not."
All the companies under fire over the amount of corporation tax paid said that they operated within the tax rules and regulations and have done nothing wrong.
bbc.co.uk
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