Ministers should act without delay to prevent a "damaging" legal loophole from putting young and vulnerable people in Rotherham at risk, according to MPs.
The Communities and Local Government Committee says it is concerned that taxis licensed by other local authorities may still operate within the south Yorkshire town - affected by an abuse scandal - even if the drivers have their application for a Rotherham licence rejected.
They added action is needed to end this situation to ensure efforts to rebuild trust and confidence in the trade are supported rather than undermined.
The MPs call for Government departments to prepare guidance in law over taxi licensing - already pledged by ministers - "without delay", adding legislation should be considered if this fails to deliver the high standards needed across the country.
Taxi drivers have had a "prominent role" in child sexual exploitation across England, including in Rotherham, according to the 2014 report by Professor Alexis Jay which examined abuse in the town during a 16-year period.
The committee of MPs noted the concerns raised relate to a "very small minority" of drivers in Rotherham but they had undermined public confidence.
They also said: "We believe that local authorities must be able to apply particular measures in relation to taxi licensing in their areas, such as requiring taxis to have CCTV installed, without those measures being undermined by taxis coming in from other areas.
"We recommend that, in order to ensure that lessons are learned from experiences in Rotherham, DCLG works with the Home Office and the Department for Transport on the preparation of statutory guidance under the Policing and Crime Bill in relation to taxi licensing.
"That guidance should be brought forward without delay. Once the guidance has been introduced, the Government should monitor the extent to which it ensures consistently high standards in taxi licensing across the country, and also enables local authorities to put in place and enforce specific measures which are appropriate for their local circumstances.
"If guidance is not able to achieve this, the Government should consider legislation."
The committee made the recommendation following an inquiry into the Government's use of commissioners in Rotherham and the London borough of Tower Hamlets.
Then, Communities Secretary Sir Eric Pickles sent commissioners to Tower Hamlets to take control over certain aspects of decision-making in December 2014 following allegations of corruption.
In February 2015, Sir Eric replaced the elected cabinet at Rotherham Council with appointed commissioners in light of the child sexual exploitation scandal.
The committee's other conclusions included the need for local authorities to learn from the experiences of Rotherham and Tower Hamlets about the need to "encourage and support" whistleblowers and to take their concerns "seriously".
The MPs also suggested that local authorities subject to Government intervention should pick up the costs despite tightened budgets.
Fees and expenses for the Rotherham commissioners total £600,867 between February 2015 and June 2016, according to council data.
Clive Betts, the Labour MP who chairs the Communities and Local Government Committee, said: "The Department for Communities and Local Government must carefully examine what worked and what could have been done better with these interventions so that the process can be improved for possible future cases.
"It is also vital that the failings in Rotherham and Tower Hamlets and the work done to address them are identified and shared so that similar issues can be addressed in other local authorities at an early stage to avoid them hitting rock bottom and having Commissioners imposed upon them.
"The DCLG and LGA (Local Government Association) clearly have important role to play in this, but local authorities must also take responsibility themselves for seeking out and sharing this best practice."
Sarah Champion, Rotherham MP and shadow minister for preventing abuse and domestic violence, attacked the Government for "not taking its oversight responsibility seriously" in relation to commissioners.
She said: "If the Government continues to devolve powers to local authorities, whilst cutting their budgets and not sharing good practice, we will start to see more loopholes and miscommunications, which will ultimately leave children vulnerable.
"I am pleased that my colleagues on the Communities and Local Government Select Committee are taking their duty to prevent a crisis in local authorities seriously. It is time for this Government to do the same."