Nearly four out of ten (39%) taxpayers who were audited by Revenue last year had underpaid their taxes.
According to the Comptroller and Auditor General's Annual Report for 2015, the average underpayment was €18,500.
The report recommended that Revenue calculate the estimated audit gap as well as investigate measures to gauge the tax gap, in order to better assess taxpayer compliance in the country.
The C&AG also said that Revenue's Random Audit Programme "is not representative of the full population".
The audit gap measures revenue losses in a tax year as a result of non-compliance by individuals and businesses registered with Revenue.
In response, Revenue said it would review the role its audit programme could play in improving tax compliance.
On the tax gap, the report acknowledged it is "challenging to measure reliably", but Revenue should "investigate the possibility of implementing analysis techniques".
Revenue said while there would be benefits from comprehensive measurement of the tax gap, they would "likely be limited" as accuracy would be an issue.
Revenue added it "does not see value in putting resources into developing a full suite of tax gap measurement tools".
Today's C&AG report also said that in 2014 the State lost out on €550m in corporation tax foregone and payments to companies, as a result of the R&D tax credit introduced in 2004.
The Comptroller and Auditor General report found that the cost of the Research and Development tax credit scheme has risen substantially since its inception.
The number of beneficiaries of the R&D tax credit scheme increased from 73 companies in 2004 to around 1,600 companies in 2014.
Over the same period, the cost of the scheme has increased from €71m to €553m.
The credit is given at a rate of 25% of qualifying expenditure and can be claimed by companies undertaking in-house R&D within Ireland.
A tax credit is also provided for expenditure on buildings and structures used for R&D.
The R&D tax credit can be claimed in addition to the standard 12.5% corporation tax deduction. Therefore, the total tax benefit is 37.5%.
The C&AG has recommended that Revenue should investigate the possibility of collating information on the compliance work it carries out on R&D specifically, given the annual cost of the R&D scheme and the fact that it is increasing each year.
Read more on the C&AG report