Margaret Hodge has criticised members of her own family for sheltering shares in Liechtenstein but said she understood why they had done so as Jewish refugees fleeing Germany during the Second World War.
The veteran Labour MP insisted the shares, which she has inherited, are now worthless and that she personally gained no benefit from them being transferred to her in Britain.
On Wednesday, The Times reported Mrs Hodge had received more than £1.5 million in shares from the tax haven of Liechtenstein.
Mrs Hodge, running to retain the seat of Barking, east London, in next week’s election, said she had not “behaved in any way inappropriately”.
Speaking to Radio 5 Live, Mrs Hodge said: “What happened here was I am a Jewish immigrant, my family came from Germany and Austria, during the war dispersed all over the world.
“An uncle in America and an aunt in France established a trust. I had absolutely nothing to do with establishing a trust. I didn’t control it and I didn’t run it.
“I didn’t benefit from it at all when it was offshore. I inherited the shares when they came onshore and I have always paid tax to the full.
“This was all a legacy, an inheritance from my refugee Jewish family.
“I only inherited the shares when they were brought onshore and I paid tax on it. Am I critical of my relatives? Yes, I don’t think she should have done what they have done.
“I understand why they did it, they were refugees.”
Mrs Hodge, who chaired the Commons public accounts committee in the last parliament, rejected assertions that she was a hypocrite, insisting that would only be the case if she had benefited while the shares were sheltered offshore.
She said: “I didn’t benefit, they weren’t mine, they weren’t under my control.
“All I can say is this was a trust established by not even people who were British citizens. They set it up, they controlled it, they ran it. Only when the shares were in the UK did I inherit them.
“Have I paid full tax – full tax – since they have been here? I have, honestly I have. I can’t see what else you could have expected me to do.
“I don’t approve of what they did, I understand why they did it. These are people who left Germany, had all their assets stripped from them, they felt very insecure. That doesn’t condone it, I’m not going to condone it.”
Challenged to give the money away, Mrs Hodge added: “To be absolutely honest now, so that doesn’t arise, there is nothing to give away.”
In its report, The Times said the money came through a controversial scheme that lets wealthy Britons move undeclared assets back to the UK without facing criminal action.
It reported that just under 96,000 Stemcor shares handed to Ms Hodge in 2011 came from the tiny principality, which is renowned for low tax rates.
Three-quarters of the shares in the family’s Liechtenstein trust had previously been held in Panama, which Mrs Hodge described last month as “one of the most secretive jurisdictions” with “the least protection anywhere in the world against money laundering”.