Ed Miliband also warns Eric Schmidt at Google conference that it's wrong for multinationals not to pay fair share

Nick Clegg raised the controversy over Google's tax affairs directly with the internet giant's chairman, Eric Schmidt, at a meeting in Downing Street this week, the deputy prime minister has revealed.

News of his intervention came as the Labour leader, Ed Miliband, told Schmidt at a conference: "When Google goes to extraordinary lengths to avoid paying its taxes, I say it's wrong."

Clegg told Schmidt his company was among those causing massive public concern over the amount of tax it pays, and it was not in the long-term interests of his own company, as he himself was discovering. David Cameron did not mention Google by name when discussing his drive for greater tax transparency with business leaders at the meeting on Monday.

The issue is hurtling up the political agenda amid successive corporate tax avoidance scandals, and growing demands by world leaders for concerted international co-operation to transform the international tax code for a digital global age.

Cameron on Wednesday was due to urge an EU summit to make progress on tax transparency. Miliband this week criticised the PM – who has vowed to make tax a top priority for the UK's presidency of the G8 this year – over his failure to confront Schmidt on the issue .

Miliband told the Google-hosted conference on Wednesday: "When Google does great things for the world, I applaud you. But when Eric Schmidt says, its current approach to tax is just capitalism, I disagree. And it's a shame Eric Schmidt isn't here to hear me say this direct: when Google goes to extraordinary lengths to avoid paying its taxes, I say it's wrong.

"And it's not just me that thinks it. It is crystal clear from your own founding principles."

Google paid only £10m in corporation tax in the UK between 2006 and 2011, despite revenues of £11.9bn.

Clegg told a press conference in London on Wednesday: "My overall approach to tax is the obvious one. I put this directly to Eric Schmidt from Google and other business leaders at a meeting in Downing Street a couple of days ago.

"We are bringing the tax burden on corporations down by lowering the rate of corporation tax but in return people have to pay their fair share."

He said tax havens were symptoms of the growing pains of globalisation. "You have got tax systems that are national, rooted in an old economy, and now we have got these new corporate Goliaths that operate in this disembodied way, particularly in the digital sector, who quite unsurprisingly think they can exploit the best deal for themselves in the cracks and crevices between the national tax systems.

"What we can do and what we are doing, absolutely at the core of our G8 agenda, is to say we have got to ensure the rules apply more evenly across the piece so big companies can't play cat and mouse with the tax system."

Aides stressed that Clegg's comments to Schmidt, made during a regular meeting of the PM's business advisory group, should not be seen as a dressing down. The deputy PM raised the issue of Google's tax affairs in a "polite but firm" way as an example of the controversies which have embroiled a number of major companies in recent months, said an aide.

Clegg told Schmidt there was massive public concern "as Google are finding out" that, at a time of austerity for ordinary households and businesses, big companies should pay their fair share of tax.

Clegg also admitted that some European Union nations such as Ireland were making it harder to reach an international agreement to clamp down on avoidance.

He said he was not "seeking to impose some rigid straightjacket of tax harmonisation", but "you do have to have clear standards of transparency and rules by which taxes are administered".

He added: "There are some governments that feel [these companies] have stolen a march on tax jurisdictions and are concerned that this will erode their competitive advantage. I think the worm has turned on this. There is now a feeling – you can see it America, Germany, the US and France – that people construct a system where there is a level playing field."