The report proposed a 25 pence (0.28 euro, $0.34) "latte levy" on disposable coffee cups, saying the money raised could be used to improve recycling facilities.
SUEZ recycling and recovery United Kingdom serves around 12 million people and handles around 10 million tonnes of waste each year.
Most paper recycling facilities reject cups because it is hard to separate the plastic inner lining from the paper, meaning only 1% of those thrown away each year are recycled.
Mr Palmer-Jones said: "For any so-called latte tax to be more than just a light and frothy foam nod to reform, we need to wake up and smell the real coffee needed for a lasting brew".
"Almost none are recycled and half a million a day are littered".
It follows research which shows the United Kingdom throws away 2.5 billion paper cups every year, with many consumers believing they are being recycled when less than 1 per cent actually are.
The MPs say the charge would lead to 750 million fewer disposable cups being discarded as litter, incinerated or sent to landfill, and would generate £438m.
But they added: "We are encouraged by industry action to increase the recycling of paper cups, with some major retail chains now offering discounts to customers with reusable cups". Coffee cup producers and distributors have not taken action to rectify this and government has sat on its hands. "Legislation needs to set a date after which the continued production of unrecyclable coffee cups is banned by law".
Some coffee shops give customers discounts for bringing their own refillable cups.
And, the committee also stated that the tax should go towards improving recycling and reprocessing facilities.
Time to crack out your reusable cups?
Instead coffee chains perpetuated customer confusion that cups are widely recyclable when they are not. The trial will begin next month and initially last for three months. "The government must do the same and introduce the levy as soon as possible".
This, the Committee said, will be achieved by a two-pronged approach - by making produces pay more for difficult-to-recycle packaging, and by improving labelling.
He said that for the so-called "latte levy" to be more than just "a light and frothy foam nod to reform" the United Kingdom needs to invest more in sustainable product design, use more recyclable materials and be better at "capturing" materials at the end of their life.
On the back of the Audit Committee's report, Starbucks announced that it was to introduce a 5p charge on disposable cups in 20-25 of its London stores as part of a trial, with all proceeds to go to environmental consultancy Hubbub.
Evidence from Eunomia Research and Consulting suggests that a "latte levy" of 25 pence on single-use cups could reduce their use by up to 30 per cent, a figure supported by Cardiff University, which conducted a study into the efficacy of charges and other measures and revealed that consumers are far more responsive to a charge than a discount.
The Grocer has contacted Pret and Costa for comment.