Labour has been slammed for failing to close a loophole that would allow some of the largest lenders to avoid tax on compensation payments linked to the car finance scandal.
City Minister Lucy Rigby has been urged to close a loophole that could see lenders save around £2billion when paying compensation.
The Guardian reports that rules were introduced in 2015 that prevent banks from deducting compensation payouts from profits before calculation corporation tax.
This was introduced to ensure lenders and banks couldn't reduce their tax bill, even if there is a huge financial impact from their wrongdoing.
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Despite this, reports suggest banks can use the loophole when they start paying compensation from the car finance scandal.
Since motor finance divisions are registered as "non-bank entities", they may not need to abide by the rules introduced in 2015, according to The Guardian.
Experts suggest that the motor finance divisions of car manufacturers are also exempt from paying.
The Office for Budget Responsibility estimates that it would cost taxpayers £2billion over the next two years, prompting urgent calls for changes.
Labour is being urged to close a loophole that could cost the taxpayer £2billion in relation to the car finance scandal
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A letter from Ms Rigby said she and Chancellor Rachel Reeves wanted to ensure that the compensation scheme set out by the Financial Conduct Authority would protect victims and lenders.
The FCA estimates that people involved in the car finance scandal would receive around £700 per agreement, at a total cost of £8.2billion.
Nikhil Rathi, chief executive of the FCA, noted that "not everyone will get everything they would like", especially for such a complex case.
Liberal Democrat MP Bobby Dean took to social media to highlight the issues around car finance, adding that he would work to protect victims of the scandal.
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The MP for Carshalton and Wallington said: "We hear from ministers over and over again about tough economic choices, but when big banks avoid £2billion in tax through a loophole, they refuse to take action.
"By ignoring this, the Government are once again choosing to side with the industry over consumers and taxpayers, just as they have done throughout the motor finance scandal.
"I'm working in Parliament to close this loophole and make sure big banks pay their fair share."
Mr Dean emphasised the scale of the car finance mis-selling scandal, with an estimated 4,000 of his residents in Sutton potentially being impacted.
Drivers could receive £700 per agreement from the car finance scandal compensation scheme, as announced after a Supreme Court decision
| PAHe has worked on the Treasury Committee to question regulators and companies on their potential involvement in the car finance scandal.
A Treasury spokesperson stated: "It is vital that consumers have access to motor finance to enable them to spread the cost of a vehicle in a way that is manageable and affordable.
"We want to see this issue resolved in an efficient and orderly way that provides certainty for consumers and firms."