The institute wrote to Chancellor Gordon Brown last week, suggesting he uncouples Gift Aid from the basic rate of tax, allowing charities to claim a flat rate of 28p in the pound from eligible donations.
"The proposed cut could have dire consequences," said Lindsay Boswell, chief executive of the institute. "There is no rational reason for HM Revenue & Customs to turn down our proposal."
The institute said the move has a precedent in the current Gift Aid system because donors paying the starting rate of tax at 10 per cent are able to Gift Aid donations at the same level as other taxpayers.
A Treasury spokesman said: "The Government will consult the industry on Gift Aid, and I assume the institute will participate."
Shadow charities minister Greg Clark said: "That the sector is having to cope with the aftermath of this Budget is disappointing."