More than a million drivers a year are exploiting a loophole in the enforcement of vehicle licensing law that allows them to pay less road tax, The Times has learnt. The DVLA has been aware of the loophole for at least four years but has failed to close it, costing the taxpayer tens of millions of pounds in lost revenue. This comes on top of estimates that up to four out of ten motorcyclists are evading road tax.

Since 2004 the DVLA has issued automatic £80 fines to drivers who do not renew their tax discs. But it does not identify evaders until the end of the second month after a disc expires. If drivers skip a month’s tax and renew their disc at the beginning of the second month, they will not be sent a fine. They can repeat the evasion every six months.

There is little risk of being caught displaying an out-of-date disc because police unofficially give at least 14 days’ grace to those displaying expired discs. There has also been a sharp fall in the number of traffic police, meaning that drivers are unlikely to be stopped later in the month.

The DVLA has only 66 enforcement officers for the whole country, and they recover an average of only £35,000 a year each in unpaid road tax — barely enough to cover the cost of employing them. A DVLA spokesman said that 100,000 drivers a month were skipping a month’s tax.

Vehicle excise duty (VED) evasion cost the taxpayer £214 million in 2006. This sum includes evasion by drivers who never register their vehicles and therefore cannot be sent automatic fines. The proportion of drivers evading road tax rose from 3.6 per cent in 2005 to 5 per cent in 2006. The DVLA admitted that it had not met its target of reducing evasion to 2.5 per cent by last month.

The Public Accounts Committee is publishing a report today calling on the DVLA and Department for Transport to “strongly consider” tougher measures to tackle evasion, such as imposing penalty points. It said that the loophole allowing drivers to skip a month’s payment should never have been allowed to exist and penalties should be imposed more quickly.

The DVLA said that it was planning a three-month trial, to begin this year, of issuing penalties within a month of a disc expiring. It was unable to explain why it did not simply force drivers to backdate their discs when renewing them.

The report said that the DVLA’s enforcement of road tax for motorcycles risks becoming “a complete laughing stock”. The MPs called on the DVLA to work with police and local councils to carry out more on-road checks, and use new powers to check bikes being driven off the public highway.

In the longer term, high-tech solutions such as computer chips in numberplates, electronic sensors in vehicles and theft-resistant plates may have to be introduced to beat the growing problem of cloned, false and foreign plates.

Edward Leigh, the committee chairman, said: “Motorists and motorcyclists who refuse to pay road tax are stealing from law-abiding taxpayers, and unlicensed cars are often associated with other forms of crime. And yet the Department for Transport and the DVLA are losing ground in their fight against VED evasion.”

The report found that camera enforcement of VED on motorbikes was difficult because they did not have front numberplates and could easily outmanoeuvre road blocks. The report cited evidence that the use of false or cloned plates to avoid levies such as the congestion charge in London and to conceal criminal activity was increasing, while the DVLA had no way of enforcing requirements for foreign drivers to obtain a tax disc after six months in the UK.

The DVLA’s performance in tackling persistent evaders was “poor”, reducing numbers by only 4 per cent to 930,000 in 2002-05, the report said. A target to halve the number who avoid official registration altogether was removed by the department last year.