The controversy over the taxation of credit unions has erupted again after the Minister for Finance accused them and Independent deputies of "hypocrisy" and of advocating tax evasion in their demands for special treatment for credit union dividends.
In comments that last night reignited the row between the credit unions and the Government, Mr McCreevy denounced proposals supported by the Irish League of Credit Unions (ILCU) as "an open invitation to people to put their money in savings which will not come to the attention of the Revenue Commissioners".
The proposals, which were recommended by a majority of a working group on the issue set up by Mr McCreevy, amounted to "inviting people to evade tax", he declared.
A spokesman for the ILCU reacted angrily last night, saying he totally rejected the Minister's comments. "The credit union movement will not be used for tax evasion," he said.
Mr McCreevy's frank comments, made in the Dail yesterday on the Report Stage of the Finance Bill, come less than two weeks after the bitter row between the Government and the credit unions appeared to have been defused. The apparent end to the row came after a two-year stand-off between Mr McCreevy and the credit unions.
In an effort to end the dispute, the Taoiseach, Tanaiste and the credit unions agreed a fortnight ago to postpone consideration of taxation until complaints from financial institutions to the European Commission have been dealt with.
The league of credit unions favours the implementation of the majority report of the working party on the taxation of credit unions, set up by Mr McCreevy almost two years ago.
These proposals include 20 per cent DIRT on credit union dividends, but the first £375 of dividends would not be taxed at all. On the next £375, 20 per cent DIRT would be imposed. Savers earning more than £750 in dividends would be taxed at 20 per cent on the entire dividend. The representatives of the Department of Finance and Revenue Commissioners on the working group had opposed these recommendations.
The Taoiseach warned two weeks ago there were issues of equity that would have to be considered before changes were made. Mr McCreevy yesterday gave his most blunt account to date of what he saw as those issues.
"Let us be dead honest about it. Even the credit union surveys show that people deposit their money in credit unions for more or less the same reasons that they deposit it in all other financial institutions, to get the best return," he said.
If the changes advocated by the working group, the credit unions, the Opposition and some independents were implemented, "the credit unions will get a competitive advantage, because people will automatically put their money there to get this tax exemption. We will be inviting people to evade tax. That is what will happen. It is a fact."
Mr McCreevy then went on to dismiss the argument that the mutual self-help aspect of the credit unions - the common bond - entitled them to different tax treatment than other financial institutions. "It makes me laugh to see the hypocrisy of deputies who speak in the House about the common bond and who play to their constituents back home for political gain while, at the same time, advocating what they know to be a system of tax evasion."
When Labour's finance spokesman Mr Derek McDowell suggested that the Minister was also accusing the credit unions and Independent deputies of such hypocrisy, Mr McCreevy said: "Yes. I agree with the last point that Deputy McDowell made." Mr McDowell last night accused Mr McCreevy of reaching "a new low by revealing his belief that the credit union movement is guilty of hypocrisy and has been promoting a system which would facilitate tax evasion. It is abject nonsense," he maintained.