Ed Miliband has accused the Government of turning a blind eye to tax avoidance as an ex-Tory Party treasurer acknowledged he had taken steps to reduce his liabilities.
The Labour leader also challenged the Prime Minister over whether he agreed with Lord Fink that "everyone" engages in the practice, which is not illegal.
His comments came after the Conservative peer acknowledged he did take "vanilla, bland" measures to reduce his tax liabilities.
However, while Mr Miliband said he stood by his charge that Lord Fink had engaged in tax avoidance, he insisted his allegation over Conservative Party "dodgy donors" was not aimed at the peer personally.
This led Lord Fink to accuse the Labour leader of a "major climbdown".
The row was triggered after claims made by Mr Miliband during a bitter exchange in the House of Commons over alleged tax avoidance linked to HSBC's Swiss private subsidiary.
The Commons Treasury Select Committee has announced it plans to investigate the allegations against the bank - taking oral evidence from both HSBC and HMRC.
Mr Miliband was speaking in the House of Commons, where he is protected by parliamentary privilege, when he named Lord Fink as one of the UK citizens listed as legally holding an account at the bank's Geneva branch.
The Labour leader also accused Mr Cameron of being "a dodgy Prime Minister surrounded by dodgy donors".
Lord Fink had branded the claim as "untrue and defamatory", and had threatened legal action if he made it in public.
But in an interview with the Evening Standard he said he did not want to sue Mr Miliband, and acknowledged he had engaged in tax avoidance, although he said this was at "the mildest end of the spectrum".
"What I did ... was at the vanilla, bland, end of the spectrum," he insisted.
Lord Fink told the newspaper: "I don't even want to sue Ed Miliband. In my life I have been libelled a few dozen times and I have never sued anybody, even for some comments that were quite outrageous.
"If he simply uses the words 'Lord Fink did ordinary tax avoidance' then no, I couldn't sue him. But if he made the statement 'dodgy' about my bank account, that was potentially libellous. That was the issue I took exception to.
"I also took exception to him saying I had questions to answer. In fact, whenever anyone has put questions to me I have answered them."
He went on: "The expression tax avoidance is so wide that everyone does tax avoidance at some level."
In a speech for the launch of Labour's education policy for the May General Election at his former school in north London, Mr Miliband said: "Yesterday a Conservative donor challenged me to stand by what I said in the House of Commons. I do.
"And believe it or not, now today he confirmed it as well. He has just said, and I quote 'I didn't object to his use of the word tax avoidance, because tax avoidance - everyone does it'.
"David Cameron must explain why he appointed a treasurer of the Conservative Party who boasts about engaging in tax avoidance and thinks it is something that everyone does.
"This is the big choice facing our country - a choice between an old economy defended by this Government in which a blind eye is turned to tax avoidance, and a new economy built by investing in the talents and education of all our young people."
But responding to Mr Miliband's comments, Lord Fink said: "Yesterday I challenged Ed Miliband to repeat the accusations he made in the Commons - that I used an HSBC bank account to avoid tax and that I was a 'dodgy donor'. He did not.
"This is a major climbdown by a man who is willing to smear without getting his facts straight."
Meanwhile, the man who lifted the lid on the HSBC tax scandal has said he first raised concerns about suspect practices at the bank in 2008 - two years earlier than previously thought.
In an interview with Sky News, Herve Falciani said he emailed and called Her Majesty's Revenue and Customs seven years ago.
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