Tax chiefs faced a mauling by MPs for bending rules to do favours for big firms at a cost of millions to the taxpayer then hiding the details from a watchdog.
Calling for senior officials to face punishment for a series of costly errors and failures, the public accounts committee warned millions more were at risk unless procedures were tightened.
Its report called for safeguards be put in place to avoid the impression that HM Revenue and Customs (HMRC) enjoyed an “unduly cosy” relationship with major companies.
The MPs demanded explanations of why officials wrongly claimed they could not discuss deals with the committee and gave “imprecise, inconsistent and potentially misleading” answers.
The report represents the conclusions of a fiery public inquiry by the influential committee, that at one point saw the country’s top tax official Dave Hartnett accused by the chair of lying.
The National Audit Office has now appointed a former judge to investigate.
Mr Hartnett, who it was recently announced will retire as HMRC Permanent Secretary for Tax in the summer, has admitted an error led him to sign off on one tax avoidance dispute.
Banking giant Goldman Sachs was allowed to skip a multi-million pound interest bill on unpaid tax on bonuses after Mr Hartnett was wrongly advised there was a “legal impediment” to collecting it.
The potential cost to the taxpayer is officially put at £8m but the committee was given evidence from a whistleblower that the sum could be as high as £20m.
In its report the MPs expressed astonishment that HMRC “chose to depart from normal governance procedures” by allowing the same senior officials to both negotiate and approve such deals.
Worse, it said, the Goldman deal was done “without legal advice” or an official note being taken of the meeting, with officials relying on the firm’s records.
No good reason had been given either for why the deal was not halted when the error was found, the MPs said – also expressed concern that a whistleblower who exposed it may have been harassed.