The Treasury should hand over some of the cash it earns from tobacco taxes to English councils to help with the cost of clearing up cigarette litter, MPs have recommended.
New laws should also be introduced forcing shops, fast food chains and restaurants to keep the outsides of their premises free from rubbish, the Communities and Local Government Committee said.
It shied away from calling for a so-called chewing gum tax but warned this is the "last chance for the industry to put its house in order".
Committee chairman Clive Betts said: "Litter is a blight on many of our communities and the public are rightly disgusted when they see discarded fast-food packaging, cigarettes, and chewing gum strewn across our streets.
"Litter levels have remained largely static over the last 12 years, with councils spending hundreds of millions of pounds of taxpayers' money fighting a losing battle.
"Government and industry need to get together to tackle the endemic litter problem. Handing a portion of tobacco levies to local councils to help pay for the cost of clearing cigarette litter would show Government is serious about getting tough on litter."
Clean up costs in England are estimated to reach up to £850 million a year with chewing gum and smoking materials the biggest problems, the committee found.
Fast food litter has increased by around 20% in the last year. Fly-tipping levels have risen by the same proportion and new f ixed penalty notices should be introduced for people who dump household items, MPs said.
Jeremy Paxman, patron of Clean Up Britain, said: "The Clean Up Britain (Club) campaign wants to work constructively with major corporations - whose brand names we see shrieking at us from street rubbish every day - to solve Britain's appalling litter problem.
"This will be an inspiring upbeat campaign aimed at changing the attitudes and behaviour of the 48% of the British population - 29 million people - who admit to dropping litter.
" We've had a number of very encouraging conversations recently, and are hopeful that many of these companies will live up to their corporate social responsibilities, so we can win this war on litter together."
Councillor Peter Box, environment spokesman for the Local Government Association, said: "Ensuring the cleanliness of our public spaces is a key priority for councils but dealing with litter and fly-tipping is expensive. Cleaning parks and streets and closing highways to collect litter is costing taxpayers nearly £1 billion each year at a time when council budgets are under increasing pressure.
"It is therefore right that manufacturers of cigarettes and chewing gum contribute to the multi-million pound clean-up costs associated with their products.
"Councils have warned that the current system of tackling people dumping household goods is in need of reform with town halls unable to reclaim the cost of taking offenders to court. We are pleased the committee has recognised that having the power to issue fixed penalties would be much more appropriate and cost-effective for councils."
Local Government Minister Kris Hopkins said: "I welcome the committee's call that it is not just the council's job but up to everyone to clean up the litter scourge, including asking industry to play a part where appropriate, but most of all it is up to individuals not to drop rubbish in the first place.
"Litter is costing council taxpayers hundreds of millions of pounds every year before we even get to the eyesore it causes and the environmental cost. That's why we are abolishing backdoor tip taxes and have supported weekly bin collections to help stop fly-tipping and bin blight.
"It's why we have funded projects through councils, Clean Up Britain and Keep Britain Tidy to help find local solutions to littering. And it's why we are organising a huge community clear up day across the country next Saturday 21 March which I urge everyone to join in with."