The lack of movement on the issue of credit union taxation in tomorrow's Finance Bill is likely to upset credit unions who are seeking a form of limited taxation.

Despite suggestions to the contrary, the Minister for Finance is not expected to put forward any proposals on credit union taxation, following his U-turn last year, when political controversy forced him to abandon planned changes to the tax treatment of credit union savers.

It is understood that the credit unions would like to see a proposal implemented where dividends above a threshold of around £375 would be subject to taxation. The threshold equates to savings of around £7,500 and would thus only impact on about 1 per cent of all credit union members.

Last year, Mr McCreevy proposed in the Finance Bill that all annual dividends over £500 by reported to the Revenue Commissioners - and thus be exposed to taxation and that all interest earned on credit union accounts be subject to 20 per cent DIRT.

While the credit unions had looked for changes in taxation before last year's bill, they strongly attacked Mr McCreevy's move. A few days later the Minister withdrew the proposed measures and established the working group to recommend a way forward.

It is understood the credit unions favour the working group's recommendations being implemented, as they fear a much larger tax being imposed from Europe if a move is not made.

According to the Minister, the League of Credit Unions itself lobbied for the changes last year and then criticised them after they were implemented. He is now insisting that the movement will have to address the matter themselves and explain the situation to members as a matter of urgency.

In another key issue for the credit unions, the Irish Bankers' Federation complained to Europe under unfair competition legislation. According to the banks, the tax regime for credit union - including their exemption from corporation tax - was unfair.

The European Commission may now recommend some form of taxation on credit unions savings and possibly at a higher level that that proposed by the working group. A standard minimum retention tax is thought most likely.

There has been some suggestion that if the Minister does not deliver on Thursday local TDs could lobby to have it included at committee stage. However, this is also thought unlikely as many TDs would be loath to lobby for a tax which could impact on their voters.