Britain's parliamentary watchdog has criticised Google for using its Irish office to avoid paying corporation tax.

In a report released this morning, the House of Commons Public Accounts Committee said Google relies on the "deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes place in the UK."

The report said that between 2006 and 2011. Google had advertising sales in the UK of $18 billion (€13.5 billion) but paid tax of only $16m (€12m) over that period. The internet giant was one of a number of American companies, including Starbucks and Amazon, hauled before politicians to explain how little tax they paid. Starbucks was later said it would pay €11.7m in tax after a backlash by customers.

Google claims that its staff didn't conclude sales agreements in the UK and therefore it is not required to pay tax. The sales are routed through Ireland and onwards to Bermuda where the company pay no tax either.

But the PAC found: "It is quite clear to us that sales to UK clients are the primary purpose, responsibility and result of its UK operation, and that the processing of sales through Google Ireland has no purpose other than to avoid UK corporation tax."

The report said the company should establish a "corporate structure that ensures Google pays tax where it generates profit."

It also wants the UK government to step up its crackdown on tax avoidance - an issue that will be addressed at the G8 meeting of major world economies in Northern Ireland next week.

Google said it pays all the tax it is required to pay and that it is up to governments to reform their own tax laws.