The Public Account Committee (PAC) has slated HM Revenues and Customs (HMRC) for software problems, which it claimed cost the Government 1.4 billion in unpaid taxes.
The software errors led to over 18 million unresolved pay as you earn (PAYE) cases stacking up over six years, affecting 15 million people.
PAC estimated the mistakes in the systems could have amounted to as much as 1.4 billion in unpaid tax, with 3 billion needing to be refunded to UK citizens.
The committee pointed the finger of blame at National Insurance and PAYE Service (NPS), which aimed to bring all pay and tax details on a citizen onto one record.
"The flawed implementation of the NPS in 2009-10 has resulted in lasting and costly losses for the department and caused unacceptable uncertainty and inconvenience to the taxpayer," PAC's report read.
"As a result of its mismanagement of PAYE processing, the department has not collected tax due from some individuals and has taken too much from others, causing both uncertainty and inequity in the system."
The gaff was first revealed in a National Audit Office report back in July last year.
PAC has given HMRC until the end of 2011 to put the system into order and resolve the outstanding cases.
