The demise of the traditional paper tax disc has coincided with a doubling in the number of untaxed vehicles being driven on Britain's roads.
More than half a million have no vehicle excise duty, compared to just over 200,000 in the year before the discs were made obsolete, according to the Department for Transport (DfT).
Motoring groups had warned that ending the requirement for tax discs to be displayed on car windscreens from October 2014 would lead to more owners evading the tax.
The RAC's chief engineer David Bizley said: "These are very worrying and disappointing statistics indeed.
"Sadly, the concerns we raised about the number of car tax evaders going up at the time the tax disc was confined to history have become a reality."
He warned that the UK cannot afford the growth in lost revenue to continue "for the sake of both road safety and the country's finances".
An estimated 560,000 vehicles are evading tax compared to 210,000 in 2013, the year before the paper tax disc was made obsolete, the DfT said.
The latest data from a survey in June shows that 1.4per cent of vehicles in use are unlicensed, which could cost about £80 million in potential lost revenue each year, although some of this will have been recovered through enforcement activity or payment by arrears.
The 2013 figure was just 0.6per cent, costing £35 million.
The demise of the paper tax disc is saving the Driver and Vehicle Licensing Agency around £7 million a year.
Chief executive Oliver Morley said: "Almost 99per cent of all vehicles on the road are correctly taxed: that's around £6 billion in vehicle tax passed to the Treasury every year.
"We write to every registered vehicle keeper in the UK to remind them when their tax is due and we have introduced a range of measures to make vehicle tax easy to pay.
"At the same time we are taking action against those who are determined to break the law."
The government agency said 75per cent of motorists pay tax online or over the phone, including 11 million who have switched to direct debit since the paper disc was ended.
Motorists who have not paid their tax can be spotted on automatic number plate recognition cameras or by police checking data.
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