Thirsk and Malton MP Kevin Hollinrake said the UK could act like China, which refuses to let Google operate unless it agrees to censoring search results in line with the Communist Party’s wishes, because online firms are “effectively taking money out of British taxpayers’ pockets.
He admitted the idea appeared “ludicrous” but said Ministers should be prepared to take drastic action if other avenues, such as pushing for international action or legislation, do not work.
It comes after Chancellor Philip Hammond said an “online sales tax” is not among Government plans to tackle the dominance of tech giants.
Instead, Ministers will look at improving “fairness” by focusing on companies whose business models were “exploiting either the personal data of UK consumers or exploiting content which is uploaded by UK consumers”.
Mr Hollinrake said it was “tough” for governments to legislate, and admitted international measures are needed to ensure firms are not allowed to “hide revenue profits in countries that charge lower corporation tax”.
“The other way to do it is to put political pressure on by saying if you don’t open your books and properly recognise the turnover you are generating in the UK and paying tax on that revenue then we will do something,” he said.
“I think we should say if you don’t want to pay tax in this country, don’t trade in this country. You saw China effectively threaten to ban Google unless they were willing to start to censoring according to what the Chinese government wanted.
“We could do the same.
“It sounds ludicrous but if these companies are taking so much money out of the UK.
“That money was supporting schools, hospitals and roads, and now it’s being transferred into a low tax jurisdiction effectively out of the taxpayers’ pocket, how long are we willing to put up with it before we start to do something significant?
“Would we ban Google ever? Well, why not? If they won’t pay their tax we’ve got to do be prepared to take tough action.”
The Treasury has issued a call for evidence on whether competition in the digital market is being stifled by tech giants.
Facebook last week faced criticism for paying Â£15.8m tax in the UK, where its sales total Â£1.3bn, while Google paid tax of around Â£50m last year despite global profits of billions.
In response, the company referred to a statement released last week by Steve Hatch, its Vice President for Northern Europe.
It said: “The UK is home to our largest engineering base outside the US and we continue to invest heavily here. By the end of 2018 we will employ 2300 people in the UK and we are doubling our office space in London's King's Cross with capacity for over 6,000 workstations by 2022.
"We have also changed the way we report tax so that revenue from customers supported by our UK teams is recorded in the UK and any taxable profit is subject to UK corporation tax.”