Tax bosses have been lambasted by MPs (BSE: MPSLTD.BO - news) for bending rules to do favours for big firms at a cost of millions to the taxpayer - then hiding the details.
The public accounts committee warned millions more were at risk unless procedures were tightened and said senior officials should face punishment for a series of costly failures.
Its (Euronext: ALITS.NX - news) report called for safeguards to be put in place to avoid the impression that HM Revenue and Customs (HMRC) enjoyed an "unduly cosy" relationship with major companies.
And the MPs demanded explanations as to why officials wrongly claimed they could not discuss deals with the committee and gave "imprecise, inconsistent and potentially misleading" answers.
Richard Murphy, founder of Tax Justice Network, told Sky News: "I think the MPs are right; there is very clear evidence that there has been a bias in the way that the tax system has been operated.
"Large companies have had a very cosy deal with the HMRC, but small businesses and individuals have had a bad deal in comparison to those.
"The Parliamentary committee has done a great job in exposing these."
The report represents the conclusions of a stormy public inquiry by the influential committee, which saw the country's top tax official Dave Hartnett accused by the chairwoman of lying.
A former judge has now been appointed to investigate by the National Audit Office.
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 approve one tax avoidance dispute.
Banking giant Goldman Sachs (NYSE: GS - news) was let off paying 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 a whistleblower told the committee the sum could be as high as £20m.
MPs expressed astonishment in the report that HMRC allowed the same senior officials to both negotiate and approve such deals.
The report also 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.
It also revealed that Mr Hartnett alone had enjoyed 107 dinners and lunches with companies, tax lawyers and advisers over two years, which MPs said raised concerns that relations could seem "unduly cosy".
HMRC, the report claimed, "consistently failed to give straight answers to our questions which has severely hampered our ability to hold it to account for the settlements reached".
Mr Murphy from Tax Justice Network said: "Large Companies have had a very cosy relationship with Dave Hartnett.
"He has been very good at socialising with them, in way that has not necessarily been minuted."
HMRC rejected the committee's conclusion that there were systemic failures in its management of tax disputes.
"The report is based on partial information, inaccurate opinion and some misunderstanding of facts," a spokesman said.
The spokesman denied the error made in the Goldman Sachs case was evidence of a wider, systemic failure and rejected the claim that the loss to the taxpayer could be as high as £20m.
"This assertion, based on untested, leaked information, is without foundation," the spokesman said.
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