COMPANIES should be legally bound to pay corporation tax in the countries where their customers are located, according to a North-East expert.

Tax law specialist , Professor Rita de la Feria, of Durham Law School, said a destination-based corporate tax system was the fairest way of ensuring that major organisations could not use the current tax system to avoid paying corporation tax.

The issue of tax avoidance will be on the agenda when leaders of the G8 group of the world's wealthiest countries meet in Northern Ireland on Monday and Tuesday (June 17-18).

Leading multinational companies such as Google, Starbucks and Amazon have been criticised for their use of the current residence-based tax system which has seen them pay relatively small amounts of corporation tax by channelling revenues through other countries with lower tax levels.

The companies have insisted that they are operating within current tax rules.

Prof de la Feria, who this week addressed the House of Lords Economic Affairs Committee on the issue of corporate taxation, is carrying out research into a destination-based corporate tax system.

Prof de la Feria said: "The law should be changed so corporation tax is based on where you carry out your sales rather than where you are based - a destination-based tax system.

"What matters then is where your customers are based and companies would pay tax on their profits in a similar way to how the current VAT system operates.

"It eliminates any possibility of profit shifting by basing your headquarters in another country," she added.

Prof de la Feria said that a co-ordinated international approach to changing corporate tax laws would be a preferable solution to the issue, but countries could make changes to their individual tax laws if they wanted to.