The operator, which contributed £1.4bn to good-cause lottery distributors in 2006/07, has submitted a report to the Treasury saying it should be exempted from paying lottery duty and should instead pay a tax on gross profits. The deregulated gambling market, which includes bookmakers and casinos, already pays gross profits tax.
Under the current regime, Camelot pays taxes before prizes are awarded, which prevents it from altering the size of prize payouts. Gross profits tax is paid after prizes have been awarded to players, so it would allow Camelot to vary prize payouts to stimulate sales.
An analysis carried out by accounting adviser PricewaterhouseCoopers for Camelot suggested that the change would initially result in a fall in revenue for HM Revenue & Customs, but absolute returns to the exchequer and good causes would eventually be higher.
A Camelot spokeswoman said: "The most demonstrably benign form of gaming, with by far the highest returns to society, cannot compete on a level playing field."
Sir Clive Booth, chair of the Big Lottery Fund, said that although he had not seen Camelot's proposal he would be prepared in principle to back its request.
The NCVO said lottery duty was intended to be an introductory measure and it has long called for a review.
Camelot has already predicted that its annual contribution to good causes will rise during the next lottery licence period, despite deductions to pay for the 2012 Olympics (Third Sector, 12 September).