The rift that has arisen between the credit union movement and the Minister for Finance dates back to Mr McCreevy's attempts to clarify the issue of how credit union savings should be taxed two years ago.
In the 1998 Finance Bill, Mr McCreevy brought forward proposals to subject dividends from credit union savings to Deposit Interest Retention Tax (DIRT).
But his attempts fell foul of the movement, prompting the fastest U-turn in the history of finance bills, when Mr McCreevy was forced to drop the controversial proposals.
After threats from independent TDs and a virtual revolt within Fianna Fail ranks, just 15 hours elapsed before Mr McCreevy announced that he would reconsider his proposals, including a requirement that credit unions report to the Revenue any dividends of £500 or more paid to members. Mr McCreevy has since made it abundantly clear that he felt betrayed by the credit union movement, which he has declined to meet in the intervening period.
At the heart of the issue is not whether DIRT should be applied to credit union shares but at what level it should kick in.
Mr McCreevy proposed to apply a 20 per cent DIRT tax to all income earned on credit union deposits. But the credit union movement argued that subjecting all credit union income to DIRT would result in many members who were not liable for tax being forced to pay DIRT.
It sought an amendment to the Finance Bill so that members' dividends would be exempt from tax for amounts of up to £700 a year, broadly equivalent to savings of £15,000.
Following the controversy, a working group was set up to consider the issue. Seven of the group's nine members - including the representative of the Department of Enterprise, Trade and Employment - backed compromise proposals that 20 per cent DIRT be applied to all credit union dividends except where a member's return is £750 or less. In such cases, the first £375 in dividends would be completely exempt, with DIRT of 20 per cent applying to the balance up to the next £375. However, the move was not supported by the representatives of the Revenue Commissioners or the Department of Finance.
The credit unions say the compromise proposal would allow members to hold savings of £7,500 tax free, offering protection to small savers and the large number of credit union members who have low incomes and no tax liability. Having been ignored for the last two years, the credit union movement has become anxious to obtain clarification on the issues involved. In particular, it is keen to secure recognition for its special role to pre-empt any moves from Brussels to treat it as just another financial institution.
Already, the credit union movement is involved in a taxation battle on another front at EU level, following a complaint by the Irish Mortgage and Savings Association over its exemption from corporation tax.
A similar complaint from the Irish Bankers' Federation was dismissed when the Commission accepted the Irish League of Credit Unions argument that it should not have to pay corporation tax because credit unions were social and voluntary in nature.
