The Taoiseach will meet the credit union movement soon to discuss possible further changes to the tax regime governing the sector, the Minister for Finance announced last night.

Mr McCreevy warned that any legislative initiative now could aggravate the situation, as the EU Commission was investigating Government policy on the issue. A complaint had been made that credit unions were benefiting unfairly as they were exempt from corporation tax and DIRT.

Mr McCreevy was speaking in the Dail during a private members' motion which called on the Government to amend the Finance Bill so returns on credit union savings were taxed as recommended by the chairman of a working group on the issue.

Among the recommendations were that the first £375 of dividend income should be tax exempt and credit unions should not have to report dividends or interest to the Revenue.

The motion also criticised the Minister for refusing to discuss the issue with Irish League of Credit Unions representatives since February 1998, when the Finance Bill was published.

The Fine Gael spokesman on finance, Mr Michael Noonan, accused the Minister of going into "a sulk" because of some "imagined slight" by the credit union movement. He said the Minister's refusal to meet the league was "unprecedented in Irish political history".

On the tax regime for credit unions, Mr Noonan said it was unfair and inequitable. Shareholders in credit unions were liable to tax on their interest and dividends at a rate of up to 44 per cent and had to make individual returns to the Revenue. In contrast, depositors in banks and building societies paid between 20 and 24 per cent tax.

Mr Noonan said the threat of "immediate and terrible war" being waged by the EU Commission on the credit union movement was an empty one. The EU had investigated the issue before and took no action, he said.

The Labour Party spokesman on finance, Mr Derek McDowell, said no one wanted to see credit unions used as a means of evading tax, but there was a persuasive case for dealing with credit unions in a preferential way.

Mr McDowell said the loss of revenue resulting from the implementation of the working group recommendations would be minimal. "In fact, it is perfectly possible that the take from tax on credit union savings would actually increase, since the level of non-compliance with the existing arrangements is almost certainly very high."

Mr McCreevy said his Department, having studied the recommendations, thought there was no case for any further tax-law changes to favour credit unions.

"Given all that we have seen and heard on DIRT and tax evasion in recent times, it does not seem prudent to contemplate a new form of accounts on which the interest is neither liable to tax nor reported to Revenue," he said.

The House will vote on the motion tonight.