The Minister for Finance met an official of the Irish League of Credit Unions yesterday for the first time in two years. Mr McCreevy met ILCU president Mr Jim McMahon to address credit union concerns about the future regulatory regime for the financial sector.

The fact that a meeting took place at all was described by one source as significant in the light of the continuing row between the two sides over the taxation of credit unions.

The row led to a stand-off, with Mr McCreevy refusing to meet the league for two years.

The principal aim of yesterday's meeting was to discuss the proposed single regulatory authority, which includes the setting up of a registrar of credit unions.

But Mr McCreevy and Mr McMahon also discussed the general question of the taxation treatment of credit unions and their members.

ILCU favours the implementation of the majority report of the working party on the taxation of credit unions, set up by Mr McCreevy two years ago.

These proposals include 20 per cent DIRT on credit union dividends, but allow for an exemption on the first £375 (€476.5) of dividends. 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.

Representatives of the Department of Finance and the Revenue Commissioners on the working group had opposed these recommendations.

After what was described by the Department of Finance as an "amicable and lengthy" meeting, the Minister and Mr McMahon agreed that further meetings would take place on taxation between Department officials and ILCU. The Minister agreed to meet the league again in "due course".

"Negotiations have started again. Both sides exchanged views and hopefully something can be worked out," said a Department of Finance official. The official refused to be drawn, however, on whether the issue would be resolved before the next Finance Bill.