International companies are being put off doing business in Britain by the fear of being attacked over their tax affairs by MPs like Margaret Hodge, the Treasury has warned.
The Public Accounts Committee chair was singled out by the Treasury for her fierce pursuit of international companies like Starbucks, Amazon and Google, having called the corporate giants to be boycotted over their "immoral" avoidance of UK taxes.
David Cameron is set to counter her messages today at the World Economic Forum in Davos by highlighting moves by the coalition to cut corporation tax to 21% in a bid to attract investors to Britain.
This will mark a major shift in tone from last year when he urged companies to "wake up and smell the coffee" over their responsibilities, in an allusion to Starbucks and its tax arrangements.
Treasury sources said: "There is no doubt it is having an impact. We are trying to show we have one of the most competitive corporate tax regimes in the world, but the message is being sent out if you come here you will be exposed to this sort of criticism from Margaret Hodge and her committee.
"The head of a company looking to move here would see the way other people have been hauled in front of MPs and subjected to criticism and will think: 'I'm not doing that.
"The likes of Starbucks and Amazon will always be here, but other companies looking at Britain are being put off the idea of moving their headquarters here."
Hodge branded the Treasury's concerns "completely fallacious" and insisted she aimed to stop tax avoidance "damaging British companies".
She told the Daily Mail: "There is a range of issues and tax is just one. To be absolutely honest I think if we don’t get this right, if we don’t get the tax from one set of people we have got to find it from others and you end up damaging British companies with British workers.
"I think it’s a completely fallacious argument that I am happy to have with them because I think they are wrong."
Treasury minister David Gauke hinted at the level of anger last year among officials when he said it was "quite understandable" for companies to be put off by moving to the UK if they are "worried that their reputations will be unfairly damaged" by attacks on their "perfectly legal and legitimate behaviour".
He said: "Tough action on tax avoidance, yes. But we must also recognise that if the debate is driven by myths and misunderstandings, we could risk jobs and investment in the UK."