More than one hundred Irish charities have called on the Minister for Finance, Mr McCreevy, to urgently introduce a mechanism by which they can reclaim VAT.
The charities say upwards of €63 million is paid in VAT each year and the money is being diverted away from those most in need because of the loophole in the tax system.
The Irish Charities Tax Reform Group (ICTRG), which represents over 100 charities across the State, has campaigned for over 10 years to get the Government to address the issue.
However, the Government maintains that European Union VAT law prevents them from introducing a VAT refund mechanism.
The ICTRG, who held its annual conference in Dublin today, says this is not the case and the situation can be remedied.
Ms Deirdre Mortell of Barnardos and chairwoman of ICTRG, said: "So long as the total national VAT take is not affected, the EU doesn't mind what individual governments do with the VAT they collect.
"Therefore, it is possible to introduce a VAT refund grant scheme for charities without falling foul of the EU," she said.
Ms Mortell says Barnardos paid over €250,000 in VAT last year alone. She said to put this in context the charity currently runs a programme for special needs children in Tallaght which costs €100,000.
The conference had hoped that the guest of honour EU Commissioner Mr David Byrne might clarify the issue in his address to delegates.
But Mr Byrne said it was unlikely the system would be modified to aid charities and conceded the position of charities had been overlooked by the VAT directives.
He did say however the campaign should continue to lobby the Department of Finance for a solution.
