Sir Brian Wyldbore-Smith, a former director of Tory party funding, told Lord Neill's Committee on Standards in Public Life that Mr Major was wrong to order the treasurers to report on donations to Chris Patten, the then party chairman.
A committee source said Mr Major, who was in Ulster yesterday, could be asked to explain the decision.
Sir Brian denied that donations bought influence or honours from the Government, but he disclosed that he turned down one donation from a foreign source who wanted to influence the choice of the secretary of state for defence.
He told the committee there was no contact between the fundraising and the prime minister until around 1991 when it was decided by Mr Major that the treasurers should report to Mr Patten, who later became the last Governor of Hong Kong.
Professor Anthony King, a member of the committee, asked Sir Brian: "Why was that change made?" He replied: "The only person who could answer that is the prime minister at the time." Professor King said: "That meant that your Chinese wall crumbled?" Sir Brian said: "It collapsed."
Sir Brian said he thought it was wrong that the treasurers should be asked to report to the chairman of the party to give details on fundraising.
He said the circumstances surrounding the donation by Bernie Ecclestone of pounds 1m to the Labour Party, involving a row over tobacco sponsorship of Formula One motor racing, was "unfortunate - that is why treasurers should not have contact with the politicians".
He said the Tory party treasurers targeted expatriates for donations, but also accepted money from foreign businessmen with interests in Britain. They included businessmen in Hong Kong.Reuse content