Britain has increased the amount it recycles, mostly by sending the waste overseas, the UK government auditor says.
The UK has increased recycling from 31 percent in 1998 to 64 percent last year, easily beating the European Union target of 55 percent.
But the National Audit Office (NAO) reports more than half the packaging reported as recycled is actually sent overseas to be processed.
It said the government had little idea of whether the recyclables were turned into new products, buried in landfill, or burned.
The NAO head, Amyas Morse, said "a tighter grip on packaging recycling is needed".
"Twenty years ago, the government set up a complex system to subsidise packaging recycling, which appears to have evolved into a comfortable way of meeting targets without addressing the fundamental issues."
Currently firms handling more than 50 tonnes of packaging a year need to show they have recycled a certain amount.
They do this by paying for a credit note from a recycling firm, with the money going to improvements in the recycling system through increased collections and processing.
Britain's environment ministry, Defra, says the scheme raised £50m in 2016.
But critics say it is hard to tell exactly how the money is being spent.
Local councils, which run waste collection services, complain they don't see a penny of it.
A UK government spokesman said the scheme had increased recycling rates "significantly" however it had already committed to overhauling the system, and reforms will be announced later this year."
Britain is one of many countries reassessing recycling and waste schemes.
Last month, a report concluded the way New Zealand manages recycling is also fundamentally broken.
China takes more than half the world's waste exports, but last year banned some products because contaminants mixed in with the imported recycling were seriously polluting its environment.
The ban is until the end of 2018, but it is likely there will be an extension.
The report, by WasteMINZ, used information from 38 councils and nine recycling operators.
It found most councils are affected by China's restrictions and selling certain plastics at a lower price or stockpiling.
The report concluded there needs to be a revision of the country's national waste strategy.