Germany's Scholz Faces Grilling Over Tax Fraud Scandal

German Chancellor Olaf Scholz will answer to a committee on Friday 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.

Scholz will testify for the second time to the parliamentary committee in Hamburg, which is probing whether local political figures helped a bank to 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 ($48 million) in taxes from private bank M. M. 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.

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 the 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 also this week faced a backlash over his failure to immediately condemn comments on the Holocaust made in Berlin by Palestinian president Mahmud Abbas.

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 press 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.

But rumours are swirling that the decision to let Warburg off the hook was taken shortly after a conversation between Scholz and Christian Olearius, then head of the bank.

Scholz has denied exerting pressure on Hamburg's tax authority over Warburg's cum-ex activity, but new allegations in recent days allege he may yet be hiding something.

According to several German media reports, investigators have seized emails from Scholz's former office manager Jeanette Schwamberger that could bring new evidence to light.

These emails are "potentially relevant to the evidence, as they suggest considerations around deleting data", according to the reports.

The Frankfurter Allgemeine Zeitung said the emails clearly "incriminate" Scholz.

Other newly seized documents reportedly suggest that Scholz, contrary to what he has claimed so far, did raise the subject of reimbursement directly with Olearius.

These latest revelations suggest that Scholz and his people have "tried to provide only limited information on certain meetings or telephone conversations", said Matthias Hauer, an opposition conservative MP.

Johannes Kahrs, a former MP with Scholz's Social Democrats (SPD) party, is also under investigation as part of the Hamburg probe.

According to German media, investigators recently found around 200,000 euros in cash in a bank safe deposit box belonging to Kahrs, though it is unclear whether the find has anything to do with the cum-ex scandal.

Asked about the cash at the summer press conference, Scholz said: "I'm as curious as you are, and of course I'd like to know where it came from."