A cross-party committee of MPs has called for the immediate abolition of new criminal courts charges, just seven months after their introduction.
The House of Commons Justice Committee voiced "grave misgivings" over the mandatory charge, which was often "grossly disproportionate" both to the seriousness of the crime committed and the ability of offenders to pay.
The prospect of a levy of as much as £1,200 if a case goes to trial created "perverse incentives" for innocent people to plead guilty in order to avoid the risk of a big bill, the committee said.
The charge was introduced by former Lord Chancellor Chris Grayling to ensure offenders paid part of the cost of the justice system, and came into effect in April this year.
But it provoked howls of criticism and more than 50 magistrates are understood to have resigned in protest.
Mr Grayling's successor Michael Gove told Parliament earlier this month that it was a "cause for concern" and his department was reviewing its operation.
In a hard-hitting report, the Justice Committee said that the lack of discretion for judges and magistrates on the level of the charge was creating "unacceptable consequences within the criminal justice system".
The report cited the case of a woman who admitted stealing a four-pack of Mars Bars worth 75p, saying she "had not eaten in days" after her benefits were sanctioned. She was ordered to pay a £150 criminal courts charge on top of her £73 fine, £85 costs, a £20 victim surcharge and 75p compensation.
Anecdotal evidence suggested defendants who had intended to plead not guilty have changed their plea in order to pay the minimum £150 charge, rather than the £1,000 they could face in a magistrates' court or £1,200 in a crown court if the case goes to trial, said the report
And it appeared some sentencers were reducing orders for costs to offset the impact of the charges, at the cost of victims and the Crown Prosecution Service.
The committee said it was "highly sceptical" of Government claims that the charges could deliver a net revenue of as much as £80-£160 million a year by 2023, with the annual cost of collection coming in at around £20 million and a £5 million bill for imprisoning defaulters.
The report said that "early indications are that only a very small proportion of fines imposed have been collected". Although no official figures were available, the committee said it appeared that just over 5% of the £5.6-£5.9 million charges handed down in the first three months had been paid - "substantially below" the rate for other types of financial sanction.
Justice Committee chairman Bob Neill said: "The evidence we have received has prompted grave misgivings about the operation of the charge, and whether, as currently framed, it is compatible with the principles of justice.
"In many cases it is grossly disproportionate, it fetters judicial discretion, and creates perverse incentives - not only for defendants to plead guilty but for sentencers to reduce awards of compensation and prosecution costs. It appears unlikely to raise the revenue which the Government predicts.
"It creates a range of serious problems and benefits no one. We would urge Michael Gove to act on our main recommendation and abolish it as soon as possible."
If he would not abolish the charges altogether, the committee said Mr Gove should, as an "irreducible minimum", give magistrates and judges the power to decide whether to impose them and what the level should be.
The Ministry of Justice pointed out that the charges are imposed only on those who plead guilty or are convicted, and can already be paid in instalments if offenders are unable to pay in full immediately.
The justice system already creates a number of incentives for defendants to enter early guilty pleas.
An MoJ spokesman said: "As the Justice Secretary has said, we note the concerns which have been expressed and are keeping the operation of the charge under review."