A major political dispute was brewing last night after the Government introduced new tax and disclosure rules on credit union savings. The Minister for Finance, Mr McCreevy, was accused of favouring offshore investors over ordinary savers and community interests.
The Irish League of Credit Unions (ILCU) said the new disclosure rules contained in the Finance Bill, published yesterday, were "inequitable."
The ILCU general secretary, Mr Tony Smyth, said the measures were "completely inappropriate" and it hoped to persuade the Government to change the legislation at committee stage in the Dail.
The new requirement on credit unions to apply DIRT (deposit interest retention tax) to deposits, and to report dividend payments of more than £500 to the Revenue Commissioners, was condemned by the opposition as further evidence that the Government's tax policy is aimed at helping the better-off.
Opposition politicians believe the new measures are in sharp contrast with the Government's objection to including a full examination of the controversial Ansbacher deposits in the Moriarty Tribunal terms.
About 9 per cent of the two million accounts held in credit unions are deposit accounts. Interest earned on these will now be subject to 20 per cent DIRT.
But Mr McCreevy insisted the new 20 per cent rate would put credit union members on a better footing, as at the moment they are meant to declare interest income and pay tax at normal rates.
The bulk of credit union members hold funds as shares. The main objections were to the new requirement on credit unions to report to the Revenue the details of anyone receiving a dividend of more than £500 per annum. But Mr McCreevy insisted that up to 98 per cent of all credit union members would be unaffected by the requirements.
Members would have to hold more than £11,000 in shares at their local credit union before they would earn a dividend of £500. The average shareholding is around £1,300.
The Democratic Left spokesman, Mr Pat Rabbitte, described the new measures as a "disgrace." The legislation confirmed the regressive nature of the Minister's tax changes, which are most beneficial to high earners, he added.
The Fine Gael spokesman on finance, Mr Michael Noonan, said that the taxation of small credit union savings was "appalling." He called on the Minister to clarify whether interest earned on Post Office savings accounts will also be liable for tax.
The Labour Party's spokesman, Mr Derek McDowell, dismissed the Finance Bill as a mere restatement of the inequitable tax changes announced in the Budget.
The ILCU general secretary claimed the Government appeared to be saying that it was better to put money into offshore accounts than local communities.
The league wants a threshold below which DIRT would not be deducted to accommodate members on low incomes who are not liable for tax.
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