An Opposition motion on credit union tax was defeated last night after the four Independent TDs voted for a Government amendment.

Mr Ivan Yates (FG, Wexford) accused the four Independents of acting "like wimps" and said they missed "a huge opportunity" to force through an amendment in the interest of equity and justice. The Fine Gael private members' motion called on the Government to amend the Finance Act, 1998, to take into account recommendations of the chairman of a working group on credit union taxation. Among the recommendations were that the first €375 of dividend income should be tax exempt and that credit unions should not have to report dividends or interest to the Revenue.

The Government amendment replaced the motion with an expression of support for the relevant provisions of the Finance Act and a recommendation to the Minister for Finance to take into account issues such as the EU's investigation of the State's tax treatment of credit unions in his ongoing consideration of the working group report.

The Independents, Mr Jackie Healy-Rae (Kerry South), Ms Mildred Fox (Wicklow), Mr Harry Blaney (Donegal NorthEast) and Mr Thomas Gildea (Donegal South-West), supported the Government, as did Mr De- nis Foley (Kerry North), who recently resigned the Fianna Fail whip.

The Fine Gael motion was supported by Labour, the Green Party, Mr Tony Gregory (Ind, Dublin Central), Mr Caoimhghin O'Caolain (SF, Cavan-Monaghan) and Mr Joe Higgins (Socialist Party Dublin-West).

Of the tax situation, Mr Yates said it was it was "manifestly unfair and unjust" that depositors in banks or building societies paid DIRT at 20 per cent, whereas investors in credit unions had to pay interest income on their dividends at a rate of 44 per cent.

He said the Minister's refusal to meet representatives of the credit union movement since the Act was introduced had led to a situation where there was non-reporting to the Revenue for the last two years and now there was a non-compliance factor.

The Labour Party spokesman on enterprise, trade and employment, Mr Pat Rabbitte, said the corporation tax issue was "a red herring", as credit unions were non-profit organisations, and said it seemed the Minister was "anxious to leave the credit union movement exposed to scrutiny or threatened scrutiny from Brussels" because of his poor relations with the group.

However, the Minister of State at the Department of Finance, Mr Martin Cullen, said the EU investigation was not bogus. "As far as I am informed, that complaint is still alive. I am certainly not aware that the Commission have come to a decision on it".

Mr Cullen reiterated Mr McCreevy's claim that any legislative change to the tax situation as proposed by the Opposition would aggravate matters with the EU. He said he was informed that an official in the Department of Finance had "an informal conversation" yesterday with an EU Commission official who confirmed it was still examining the complaint made by another Irish financial organisation against the tax treatment of credit unions. Mr Cullen said the Taoiseach, would meet the Irish League of Credit Unions next week.