Charities could gain up to £100 million (€127 million) a year in VAT relief if the Government adopts policies being developed by the Irish Charities' Tax Reform Group - an organisation representing more than 60 groups.

Mr Jim Somers, head of indirect tax at Ernst & Young and adviser to the group, said the time had come for the Government to act.

"Right now the Government has a lot of money at its disposal and public opinion would support a move to give more to charity. Most people don't know that when they give money to charity, 12.5 per cent or 21 per cent of it goes out in VAT," he said.

The group - which held its a.g.m. in Dublin yesterday - is to put a proposal to the Minister for Finance, Mr McCreevy, before the end of the year and in time for the Finance Bill due in January. It will focus on specific costings and legal issues that will bring Ireland more in line with the UK where charities are not charged VAT.

"What the UK has may not suit us. We have to decide what amount of relief should be given, which charities should benefit, and how much it's going to cost the Government," said Mr Somers said.

The group has been in discussions with the Minister for more than a year but without result. Mr McCreevy is attending the World Bank meetings in Prague and could not be reached for comment but Mr Somers says initial responses from the Department have been positive, if cautious.

The Department of Finance said Irish VAT law must comply with EU VAT law, under which charities do not charge VAT on the goods and services they provide but are also unable to recover VAT on their purchases. Mr Somers said various methods to create refunds for charities from the Government will be teased out in the group's proposal.