The “tax gap” would be enough to fund a 1.5p cut in the basic rate of Income Tax, according to the report.

Between 2010 and 2015 £13.9 billion was lost due to the illicit trade in cigarettes, with £5.8 billion being lost because of the black market in spirits.

A further £3.5 billion was lost to the illicit trade in wine and £4.8 billion to diesel.

The report states: “HMRC has clearly been unsuccessful at claiming these duties for some time and therefore it needs to take decisive action, not introduce policies that make it worse. It is unfair that higher taxes for ordinary families are often used to make up the shortfall.

“The loss of £31.8 billion in revenue over a five year period could have funded a 1.5p cut in the basic rate of Income Tax. Not only would this have helped millions of ordinary families, but it would also have had a big impact on the jobs market, which is particularly important at this time.”