In the fastest U-turn in the history of finance Bills, the Government is set to drop its controversial proposal requiring credit unions to report to the Revenue Commissioners.
After threats from Independent TDs and a virtual revolt within Fianna Fail ranks, the Minister for Finance, Mr McCreevy, announced that he would reconsider the measure within a record 15 hours of publishing the Bill.
With unanimous acceptance that the minority Coalition had scored a spectacular own-goal, Government strategists were assessing its possible impact on the outcomes of the two key by-elections in Dublin North and Limerick East next month.
Apparently without talking to the Taoiseach, Mr McCreevy moved to ease the pressure, announcing at 7.35 a.m. yesterday that he would reconsider the proposal to require credit unions to report to the Revenue any dividends of over £500 paid to members.
He went even further to kill the controversy by stating: "If the reportage requirement is not what they [the Irish League of Credit Unions] want, it can be looked at again and we can go along with their proposals, which they put forward themselves, that I take money from them".
In a most unusual move, the contents of a letter from the league to the Minister, dated December 21st last, were released by the Department of Finance. The league's general secretary, Mr Tony Smyth, suggested in that letter that DIRT tax should apply to dividends on shares with an exemption threshold of £15,000.
Though the credit union proposals were discussed and approved at last Tuesday's Cabinet meeting, there was no visible support for Mr McCreevy from his Government colleagues. Denying that he had ordered Mr McCreevy to backtrack on an RTE interview, the Taoiseach, Mr Ahern, was equivocal when asked if he approved of the proposed new measure. "I approve of the fact that Mr McCreevy will be meeting the credit union movement", he said.
That meeting is for 9 a.m. on Tuesday, before the Cabinet meeting at 11 a.m., and the debate on the Second Stage of the Finance Bill that afternoon.
The severity of the political storm over the credit union measures, meanwhile, is causing speculation that the Government may have difficulty getting its revised proposals through the Dail during the by-election campaigns.
The Cork Fianna Fail TD, Mr Batt O'Keeffe, said the plan to tax credit union savings was a major political mistake on the part of the Finance Minister.
The Independent TD, Ms Mildred Fox, said she had sought clarification from the Taoiseach's Department yesterday. Having received it, she added, "the Government still can't take my support for granted". The other key Independents, Mr Jackie HealyRae and Mr Harry Blaney, have also voiced their opposition.
Mr Thomas Gildea, the Donegal Independent, said the targeting of credit unions was scandalous and unacceptable.
Government sources admitted privately that it was the principle of taxing savings in credit unions, never mind the fine detail, which was causing difficulty. Fianna Fail had to mount a huge counter-offensive to ease its backbenchers' trauma.
Armed with a people's issue at last, Opposition spokesmen were scathing in their attacks on the Government. They drew a contrast between the Government's "softly, softly" treatment of Ansbacher account-holders and the decision to target small savers in the credit union movement.
Mr Michael Noonan said the Taoiseach and the Minister had resisted a thorough investigation of the Ansbacher accounts, maintained by the very wealthy, but were "taxing the modest savings of credit union account-holders." See also: Page 6; Dick Walsh: Page 14
