The Minister for Finance, Mr McCreevy, will no doubt plead that the tax changes in relation to credit unions in the Finance Bill are justified on the grounds of equity. Since credit unions are developing into fully-fledged financial institutions, it is, the argument goes, not unreasonable to impose a 20 per cent DIRT tax on credit union deposits - especially when deposit holders with banks and building societies are liable to a 26 per cent DIRT charge on normal accounts. In theory, of course, all deposit interest should be declared to the Revenue Commissioners and subject to tax, although in practice this is not the case.
In truth, the vast majority of credit union deposit holders will not be greatly affected by Mr McCreevy's decision; most will scarcely earn enough interest to attract a high level of DIRT payment. The Irish League of Credit Unions has suggested that small deposits be exempted, a suggestion worth considering.
Mr McCreevy has also decided to place new reporting obligations to the Revenue Commissioners on the credit unions - which will apply when the dividend on shares exceeds £500 in one year - even though no such requirements have been placed on banks and building societies. The Minister maintains that some 98 per cent of account holders will not be affected by this requirement; but this will hardly lessen the sense of grievance felt by credit union members.
Mr McCreevy's credit union measures have received a frosty political response. For all their admirable intent, they will be seen as an attack on the little man or woman, at a time when the tax-evasion schemes availed of by the rich, are in the headlines. Credit union accounts are not generally favoured by those who maintain off-shore deposits in the Cayman Islands or the Isle of Man. And the Government is to wait until the Moriarty Tribunal reports before it decides what action to take in relation to offshore accounts.
New taxes and reporting requirements for credit unions do not sit happily with tales of millions of pounds stashed offshore. And the contrast with the supportive way in which this Government has treated the better-off in this society through a series of tax changes in the budget - notably the decision to reduce Capital Gains Tax from 40 to 20 per cent- could hardly be more obvious.
It is also curious that the new DIRT tax does not, apparently, apply to Post Office savings accounts. The Government is vulnerable to the charge that it is more protective of its own interests.
The Minister would do well to listen to the points made by the credit unions in response to his proposals. Why should he put reporting requirements on the credit unions and not on other financial institutions? And is the tax treatment of dividends and shareholdings not going to encourage funds to move from credit unions to deposit accounts in banks - which would not be in the interest of the credit-union movement. The contribution of the credit unions is felt in every parish and many work places in this State; the Government needs to have close regard for this as it hones the Finance Bill in the weeks ahead.