The Public Accounts Committee (PAC) has claimed that the broadcaster has allowed workers - including high-profile names such as Fiona Bruce and Jeremy Paxman - to be paid as if they were companies instead of staff members.
The BBC has confirmed that it pays 1,500 of its top TV and radio presenters using this method, which is higher than the amount of 300 which it had previously stated.
MPs have said that the pay method - which is legal - is "staggeringly inappropriate", and have urged for it to be axed, the Daily Telegraph reports.
The investigation found that the BBC issues 25,000 contracts in total to freelance staff members, with no guarantee that they are paying their taxes fully.
4,500 contributors are paid via outside companies, including 1,500 high profile 'on-screen' talent stars, which is twice as many as the amount of civil servants who were found to be paid this way in the Government earlier this year.
By being paid through a company rather than PAYE, it means that freelance staff members only pay 21% corporation tax of their firm's earnings rather than the usual income tax of up to 50%, potentially saving them up to thousands of pounds a year. This method also avoids having to pay some National Insurance contributions.
Fiona Bruce, Joanna Gosling, Emily Maitlis, Sophie Raworth, Gavin Esler, Jeremy Paxman and Radio 2 presenter Chris Evans are among the top stars who are reportedly paid using this practice.
Paxman told the Daily Mail that the BBC told him to set up a company in order to be paid, or he would have to stop hosting Newsnight.
Bruce added: "I, and a number of other presenters, have to form service companies to be employed by the BBC. It's not my choice... but that's the situation."
Bruce uses a company named Paradox Productions, while Graham Norton previously owned a half-share of So Television. Richard Hammond, James May and Chris Moyles also used their own firms.
Chairman of the Public Accounts Committee, Margaret Hodge MP, said: "I want the BBC to stop and call a halt to what is completely unacceptable use of tax avoidance schemes.
"The BBC's revenues are from hard earned taxes from ordinary families and they have a duty to lead by example – they have a double duty to be cleaner than clean."
The report continued: "Although the BBC told us it provides information on its off-payroll arrangements to HM Revenue & Customs, it has no means of ensuring that its freelancers are paying the right amount of tax."
The BBC has responded by stating that its 'off-payroll staff' were "freelance workers", with the pay method being "a pretty standard model" for the broadcasting industry, and that it was "important to the economics of the BBC".
It also pointed out that the actual number of contributors paid in this way could be less than the 25,000 cited by the PAC, saying that "in many cases an individual - such as an occasional contributor to programmes - could be issued with a contract each time he or she is booked to appear".
The corporation added: "We note the conclusions of the PAC report and will respond to the points raised as part of our detailed review of tax arrangements."
Earlier this year, Jimmy Carr and Gary Barlow were among stars who were criticised for their tax avoidance schemes.