The Daily Telegraph said that Government departments were paying the taxes on perks such as official cars, first class rail travel and rent-free accommodation.
One senior Conservative MP expressed surprise at the arrangements, saying they were out of line with what could be expected in the private sector.
However, HM Revenue and Customs (HMRC) insisted that taxpayers did not lose out as a result of rules which had been in place since the 1970s.
According to the Telegraph, officials who have benefited from the system include the Cabinet Secretary, Sir Jeremy Heywood, the head of NHS England, Sir David Nicholson, and the former head of the Serious Fraud Office, Phillippa Williamson.
It said that the effect of the deal was to increase the value of their pay packages by up to £30,000 a year.
According to the paper, Sir Jeremy has the use of a chauffeur-driven Toyota Prius which, it said, had cost taxpayers £172,100 over the past two years - including a tax bill estimated at more than £49,000.
Richard Bacon, a Conservative member of the Commons Public Accounts Committee, expressed concern at the arrangements.
"Most taxpayers would be surprised to find that this sort of thing is tax-free. These are out of line with what one would expect from the way people in the private sector are treated," he told the Telegraph.
"Taxpayers are already paying a lot for these people, I don't think they would be expecting to dig into their pocket to pay for the tax on the benefit as well."
However HMRC insisted that the arrangements were in order.
"We can't discuss individual cases. However, cars provided by an employer that are available for employee use are a benefit in kind for the employee and are taxable. These rules have been in place for 37 years," it said in a statement.
"Employers may choose to pay the tax due on the benefit. If so any such payment will constitute an additional benefit - which will also be taxable on the employee.
"This is quite a common practice by employers and is a matter between employer and employee. HMRC makes sure all the tax due is paid."
© 2013 Press Association