Germany’s Chancellor Scholz faces grilling over tax fraud scandal

Germany’s Chancellor Scholz faces grilling over tax fraud scandal

German Chancellor Olaf Scholz is due to answer to a committee as part of investigations into a financial scandal that cost the government billions, as the leader struggles to shed suspicions over his possible role in the huge tax fraud scam.

On Friday, Scholz will testify for the second time to the parliamentary committee in Hamburg, which is probing whether local political figures helped a bank avoid paying back falsely claimed tax rebates.

Scholz was the mayor of Hamburg from 2011 to 2018, when he became finance minister in the cabinet of the then-Chancellor, Angela Merkel.

First exposed in 2017, the “cum-ex” scam involved numerous participants swiftly exchanging company shares amongst themselves around dividend day to claim multiple tax rebates on a single payout.

Dozens of people have been indicted over the scandal in Germany, including bankers, stock traders, lawyers and financial consultants.

The Hamburg committee is investigating why local finance authorities in 2016 dropped a bid to claw back 47 million euros ($48m) in taxes from private bank MM Warburg over cum-ex trades.

The bank eventually had to pay back tens of millions of euros under pressure from Merkel’s federal government.

According to German media reports, investigators have examined emails from the account used by Scholz during his time as the mayor of Hamburg in connection with the scandal.

Dismal ratings

The grilling in Hamburg comes with Scholz already facing dismal popularity ratings after his first six months in office were tarnished by criticism over his perceived weak response to Russia’s all-out war in Ukraine.

More recently, the chancellor has also struggled to reassure Germans over possible energy shortages this winter and the very real prospect of a recession in Europe’s biggest economy.

Scholz’s spokesman Steffen Hebestreit on Wednesday assured journalists that the chancellor would answer all of the committee’s questions and had nothing to hide.

Asked about the scandal himself during a summer news conference last week, Scholz said he had “commented on these things very extensively and for many hours and will do so again”.

“A huge number of hearings, a huge number of files have brought only one result: there are no findings that there was political influence,” he said.