By Thomas Atkins
FRANKFURT, Nov 28 (Reuters) - Germany's second-largest bank HVB Group on Thursday joined the chorus of critics of the government's tax-hike plans, saying they were burdensome for banks and have already driven investor insecurity to new highs.
HVB joins German banks, fund managers and manufacturers who have heaped criticism on the government for plans to raise revenue by extending the scope of taxes on capital gains for small investors, by hiking taxes on company cars and other measures.
"The disadvantage is that uncertainty is now higher than it ever was," said Burkhard Breiing, the divisional management board member who oversees HVB's retail banking operations, in an interview with Reuters.
Separately in Berlin, Germany's fund management companies scorned government plans for tax changes on Thursday, saying the measures were absurd and would create a "bureaucratic monster" scaring off investors.
The BVI association of investment funds and asset managers, which represents firms such as Deutsche Bank's DWS and Dresdner Bank's DIT, said it was confident it could persuade the government to revise the plans, which it said would hurt Germany's standing as a financial centre.
"We're confident that, given how absurd it is, the tax plan will be changed," said Axel-Guenter Benkner, spokesman for BVI's board, at a news conference.
But in a signal that the uncertainty was unlikely to go away soon, Finance Minister Hans Eichel said no decision on the proposals was expected until after regional elections next year as the government battles with the opposition, which has threatened to block the tax changes.
"My forecast is this will last until the elections in Lower Saxony and Hesse on February 2, because until then the opposition will not say what they want to do," Eichel told ZDF television.
Chancellor Gerhard Schroeder's centre-left government, trying to increase flagging tax revenues as the economy slows, wants to introduce a 15 percent tax on capital gains from stock market investments.
AFTER THE DELUGE
HVB's Breiing said the plans threaten banks with a deluge of costly paperwork. "A mass of administrative regulations will hit the banks," he said.
On Wednesday, Dietrich Hoppenstedt, head of the huge Sparkassen savings bank association, which comprises about 50 percent of the German banking market, slammed the proposals, saying they could trigger an exodus of capital from Germany.
Hoppenstedt said the bank sector would be used as the "long arm of the law" to supervise retail investor activity, costing up to a billion euros to implement for his group alone.
Hoppenstedt's strong statements are seen as a signal that the government could encounter widespread opposition to the tax plans at the level of state and local governments, usually the controlling owners of the Sparkassen.
Europe's second-largest chipmaker Infineon Technologies AG said the plans could trigger an exodus of jobs from Germany, while luxury car maker BMW warned that plans to hike taxes on company cars would burden sales.
But HVB hopes that insecurity triggered by the proposals will have a silver lining, driving up demand for retail advisory services as small investors seek to untangle the mass of proposed regulations and plan for retirement, Breiing said.
In addition, the likelihood of a state pension shortfall and the rising need for private investors to save for retirement -- instead of relying on a state system rapidly running out of cash -- will drive up demand for advisory services, he said.
"The positive thing is that the need for expert advice will grow," he said. "This is the first time since the second world war that Germans have had to think about saving for their retirement."
Breiing expects customers to migrate to banks such as HVB that are prepared to offer investor advice to their retail clients.
(Additional reporting by Nick Antonovics and David Crossland in Berlin)