George Osborne has been accused of missing a golden opportunity to crack down on tax avoidance by multinational companies by making it part of the Government's EU reform agenda.
In a Commons debate, Labour argued that David Cameron's EU proposals should have included measures such as country-by-country reporting, which would force firms to disclose the sales, profits and taxes paid in each nation where they operate.
John McDonnell, the shadow Chancellor, claimed Google's £130m "sweetheart" deal with HM Revenue and Customs had "driven a coach and horses" through international efforts to ensure that multinationals pay more tax. "The UK is now becoming depicted across Europe as a tax haven," he warned. "It risks establishing a race to the bottom in which every country outbids each other to offer the lowest possible taxation."
But a Labour motion calling for full details of the Google agreement to be published and the swift introduction of country-by-country reporting was defeated by 299 votes to 271, a government majority of 28.