Vince Cable, business secretary has come out in favour of country-by-country reporting of corporation tax by multinationals, a proposal first put forward by the European Parliament last year.

The business secretary said that by adopting such an approach, companies could avoid the negative fallout that befell Starbucks, Google and Amazon last autumn. If all the relevant facts were available and companies had to publish all tax payments, there would be less misinformation about possible tax avoidance.

He said multinationals like the US coffee giant actually had a 'good story' to tell about its UK business even though it had come in for severe criticism in some quarters over the level of corporation tax it pays.

Cable stressed that any proposals should be driven by the G8 rather than just a European-led measure. They should also be underpinned by the OECD playing a key role after the UK and Germany backed the economic body's review of international tax policy.

Adding further weight to the bid is the UK Treasury, which said it was broadly supportive of a move towards greater transparency.

The European parliament wants the new rules to initially apply to banks.

In an interview in The Sunday Telegraph, Cable said: 'I'm very sympathetic [to the idea of country-by-country reporting]. If something could come out of the G8 process leading into the OECD that would be very good. Then you would get a proper international agreement across the countries that matter. That would be a good forum in which to get some kind of agreement to establish good practice.'

The UK is set to chair the G8 in Lough Erne in Northern Ireland in June and Prime Minister David Cameron has already intimated that he wants to drive forward an international agreement on how companies pay taxes.

In a direct reference to the Starbucks tax issue, despite amassing sales of £1.2bn, the Lib Dem MP said there was a 'danger at the moment that this just spills over into a generalised anti-business, anti-multinational sentiment which is unhelpful because we do want successful businesses, we do want inward investment'.

He said his staff had 'spent quite a bit of time talking to Starbucks and going through their accounts with them and it did turn out that they hadn't made any profits here on which to pay tax. They actually had a good story but because you had to burrow away it didn't emerge and their reputation has been severely tarnished as a result. It would have been much better if the whole thing had been open'.

But as David Whiscombe, tax director at Berg Kaprow Lewis has pointed out, the issue of corporate returns is far from black and white.

'While a public company that had contrived to reduce its tax bill to the lowest possible figure might well come under pressure from the public and its customers to change its ways, it is equally possible that a public company which reported relatively high tax payments might well find itself coming under greater pressure from its shareholders to implement more aggressive tax planning strategies,' said Whiscombe.

'Disclosure may have precisely the opposite effect to that which was intended.'