BILLIONS of pounds in tax could have been dodged because the Government is failing to track abuse of reliefs, says a watchdog.

The National Audit Office (NAO) found HM Revenue & Customs (HMRC) had done little to investigate why Entrepreneurs' Relief, introduced in 2008, was costing the public purse £2 billion a year more than expected.

Claims for share loss relief soared by more than 300 per cent to £1.2 billion in 2006/07 after a number of aggressive avoidance schemes appeared - but the taxman did not identify the scale of the increase until 2013.

The watchdog examined ten tax breaks in detail to see whether the Government was monitoring them properly.

It found data was not always held on the cost of reliefs to the public purse.

HMRC rarely assessed if tax breaks were having the desired effects on behaviour or whether they were being widely abused.

Of 46 high-value reliefs with economic or social objectives, 11 had increased by at least a quarter in real terms since 2007.