The UK needs to "beef up" action against tax avoidance and subterfuge by big firms, Vince Cable has said.
The Business Secretary said more needed to be done to crack down on tax "dodging", accusing some companies of engaging in "systematic abuse".
He said: "You have got to have a combination of action at an international level, which the Chancellor is pursuing with other countries which are just as angry as we are about the way the system is being fiddled.
"And we've got to beef up our own capacity to crack down on tax abuse here."
Mr Cable said the UK had to be an "attractive place" to do business if it was to bring in the foreign investment it needed.
"We need inward investment and we need companies coming from all over the world so we need to make this an attractive place," he told BBC1's Andrew Marr Show.
"But while they are here, if they make profits they should pay tax on their profits.
"There is nothing more galling to small and medium-sized companies that pay their tax to the British Government and we find these people dodging it."
Mr Cable added the UK tax authorities had to take a tough line on royalty payments where he said a lot of the subterfuge takes place.
He said it was "completely unacceptable where there is systematic abuse taking place", but said it was not easy getting to the bottom of the often-complex operations.
"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."