Some commentators estimate that the proposed change could lead to the value of corporate donations rising by up to a quarter.
Until 2000, charities could reclaim corporation tax on donations from business. But the system was changed in the 2000 Budget so that the tax relief went to corporate donors.
It was widely hoped that companies would increase their giving in response to the incentive. But this did not happen. According to research by the Charities Aid Foundation, two years after the change was introduced the charity sector had lost £66m, or 21 per cent, of its corporate income.
Mike Wade, head of central fundraising at relief charity WaterAid, said few if any companies had increased their giving as a result of the 2000 change. "If the benefit went to charities, we could demonstrate that corporate donations would achieve more, and inspire more companies to give as a result," he said.
The institute, whose recommendation will feed into the Treasury's Gift Aid review, said 87 per cent of its members said they wanted corporate Gift Aid to be changed back to the pre-2000 system.