The DVLA saw a £223 million loss in revenue in the first six months of abolishing paper tax disc, reports have revealed.
The report noted that between October 2014 and March 2015, £2.7 billion was collected in Vehicle Exercise Duty, which is £233m lower than the amount collected the previous year.
The controversial switch from a paper disc to an online system that was made in 2014, cost £1 million and it was claimed at the time by the Government financial watchdog that there would be no "material increase in lost revenue."
The National Audit Office said the changeover "has likely contributed to an initial increase in reported levels of non-payment, which has led to additional compliance and enforcement activity."
The spokesman added: "The drop in revenue could be partly explained by more motorist switching to paying their vehicle tax through direct debit, with lower monthly payments recorded as a result. Motorists are also buying more eco-friendly vehicles with lower tax bills."
It is estimated more than 10million motorists pay their car tax by direct debit. It has been mentioned by the DVLA that the Government has several ways to take action against those who have failed to pay their car tax.
This has led to the DVLA to call in support of a debt collection agency to get the missing payments.
Oliver Morley, DVLA chief executive, said: "Almost 99 per cent of all vehicles on the road are correctly taxed: that's around £6bn in vehicle tax passed to the Treasury every year."
Local authorities are currently using a network of cameras that are linked to a database to work out which vehicles are being driven illegally.
Morley stated: "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."