I am aware of the Say No to VAT for Charities campaign currently being run by the Irish Charities Tax Reform Group. The current VAT treatment of charities is based on EU VAT law, specifically the Sixth EU VAT Directive, with which Irish VAT law must comply. Under this directive, a wide range of charitable and voluntary activities are exempt for VAT purposes. This means that they do not have to charge VAT on the services that they supply. However, their exempt status necessitates that these organisations are unable to recover the VAT paid by them in the course of their activities.
In general, companies and persons who are registered for VAT are required to charge VAT on the goods and services they provide. As VAT is charged on the total final price, companies are allowed recover VAT on their inputs. Otherwise VAT would effectively be collected twice on some of the value of the goods or services. This does not arise for exempt activities. This is the essential difference between taxable and exempt entitles.