Tax breaks should be used to prevent art works being sold abroad and encourage people to donate to public collections, a government report says.
Raphael's Madonna of the Pinks cannot leave the country
Under the proposals owners who donate an art work would be able to offset the value of the work against tax.
The Treasury report was carried out by Sir Nicholas Goodison, former chairman of the National Art Collections Fund.
"We must find ways of encouraging more gifts from private owners," he said, adding the report had consulted widely.
The issue of art works being lost to the nation was highlighted recently by the case of Raphael's Madonna of the Pinks.
The government has extended an export ban on the painting to give campaigners more time to match the £35m its owner, the Duke of Northumberland, has been offered by the J Paul Getty Museum in Los Angeles.
'Harder to compete'
"In recent years it has been harder and harder for [Britain's museums] to compete to buy essential works of art and culture," he said.
"My recommendations, if adopted, will lead to more people giving works of art and other objects of cultural interest to national and regional collections."
His former employers, the National Art Collections Fund, have endorsed the report.
"The future lies in the development of a much more effective partnership between Government and private donors," said its director, David Barrie.
"The Treasury must therefore take steps to encourage individual giving - in particular by means of income tax relief."