HMRC has failed to collect £35 billion in tax, partly due to the fact it has laid off staff responsible for collecting the money.
A report by the public accounts committee found that by cutting staff by 3,300, HMRC failed to claw back an extra £1.1 billion of money it was owed, raising questions about whether spending cuts are becoming self-defeating.
In total, a £387 million investment in claiming unpaid tax has seen an additional £4.32 billion received over the last five years, but MPs warned even more could have been reclaimed if the HMRC approaches spending cuts on the basis of delivering value for money.
"Delays in introducing key technology have led to some of the intended benefits of the programme being postponed or lost altogether," committee chair Margaret Hodge said.
"In particular, by delaying its new Caseflow and Spectrum systems, the department has reduced the amount of additional tax likely to be collected by 2014-15 from £743 million to £547 million."
Elsewhere in the report, MPs also expressed shock that senior public sector employees had been advised by the department to avoid tax by using a managed service company.
"It is incredible that the department could under any circumstances advise that this was acceptable behaviour for a public servant," the report said.