Irish charities paid €63 million in VAT to the Government last year, according to their most recent estimates.
Charities say the money is being denied to those most in need and could be used to fund projects in Ireland and overseas.
A campaign has begun calling on the Government to refund the money to which charities say they have a "moral right". It is being organised by the Irish Charities Tax Reform Group (ICTRG) which represents 100 registered charities across the State.
Groups such as Barnardos, Vincent de Paul, Simon and the Hospice Movement say their services could be "vastly enhanced" if the burden of VAT was relieved.
Ms Deirdre Mortell of Barnardos and chairwoman of ICTRG, told ireland.comsome charities are giving almost all the money they generate from fundraising back to the Government in VAT returns.
Ms Mortell said: "It is not widely known that charities are unable to reclaim VAT which means the sector pays 21 per cent extra on almost all products and services we purchase. For some charities this is a crippling experience and must be addressed".
"If the public were aware of this they would be outraged," she said.
Under EU law, the Government must colllect VAT but it is up to them as to who they refund it to. In the United States, Australia and New Zealand, there are systems in place to allow charities avoid paying tax in this way.
The ICTRG is calling on the Government and all political parties, who might be in the next Government to make a commitment to refunding the VAT. As part of its campaign it has set up a website - www.vatcampaign.com - that allows people to register their support.
