Germany’s Scholz denies wrongdoing in handling multibillion-dollar tax fraud

  • Scholz testifies before Hamburg lawmakers about handling fraud
  • Case risks undermining Scholz as he faces multiple crises
  • Scholz’s popularity lags behind the top ministers, the SPD party third in the polls

BERLIN, Aug 19 (Reuters) – German Chancellor Olaf Scholz rejected allegations of wrongdoing in his handling of a multibillion-dollar tax fraud while mayor of Hamburg at a hearing before lawmakers on Friday in a case that threatens to tarnish him even as he fights multiple crises. .

In the “cum-ex” or dividend elimination scheme, banks and investors would quickly swap company shares around their dividend payday, blurring ownership of the shares and allowing multiple parties to falsely claim tax refunds on the dividends.

The loophole, now closed, took on a political dimension in the northern port of Hamburg due to authorities being slow in 2016 under the Scholz mayor to demand repayment of millions of euros earned under the scheme by local bank Warburg.

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Warburg, which plays a major role in Germany’s second-largest city, has finally paid its tax bill of around 50 million euros ($50.3 million) after the federal Finance Ministry intervened.

“I did not exercise any influence in the Warburg tax case,” Scholz said on Friday during his second appearance before a Hamburg parliamentary investigation committee into the cum-ex affair, one of Germany’s biggest post-war corporate scandals.

“There is nowhere even the slightest suggestion that I agreed to anything,” he said, referring to other testimony before the committee.

Richard Seelmaecker, representative of the opposition Conservatives on the committee, said however that Scholz could be called to testify before lawmakers for a third time, as new findings from the investigation were just emerging.

The case threatens to undermine the chancellor even as he tries to hold his fractious coalition together in the face of public discontent over high energy costs.

His popularity already lags behind that of his finance and foreign ministers, while only 58% of Germans think he is doing a good job compared to an average of around 70% for his predecessor, Angela Merkel, during his 16 years in office.

Meanwhile, his Social Democratic Party (SPD) has slipped to third place in the polls behind the opposition Conservatives and junior coalition partners the Greens.

200,000 EUROS IN A SAFE

Finance Minister Christian Lindner, of the coalition’s junior party, the pro-business Free Democrats, which is also trailing in the polls, threw his support behind the chancellor.

“I have always understood that Olaf Scholz is a person of integrity, whether he was in the opposition or now in government, and I have no reason to doubt that now,” Lindner told the Rheinische Post newspaper.

Prominent Greens have remained silent on the matter after criticizing Scholz on it while he was in opposition.

Recent headlines that prosecutors investigating the scheme in Hamburg discovered €200,000 in the safe of a local politician from Scholz’s Social Democratic rulers reignited suspicions of political intervention on behalf of the bank.

Scholz has denied any knowledge of this cash or its origin and said he no longer has contact with the lawmaker involved. The lawmaker did not respond to a request for comment.

“I am hopeful that the guesswork and innuendo will stop,” Scholz said. “They are baseless.”

The chancellor already confronted lawmakers in Hamburg last year and acknowledged having had a series of meetings with then-President Warburg, but said he could not recall the details.

Gerhard Schick, director of watchdog Finance Watch Germany and a former Greens deputy in the lower house of the Bundestag, said he did not believe Scholz had been forgotten.

“I think that’s a simulation and it damages their credibility,” he said.

One of the prosecutors’ recent findings is a discrepancy between the many calendar entries from the Hamburg authorities mentioning the Warburg bank and “cum-ex” and the few emails on the subject, Der Spiegel magazine wrote, citing the prosecutors report.

“This suggests targeted deletion (of emails),” Spiegel quoted the report as saying.

A representative of corruption watchdog Transparency International, Stephan Ohme, said it was simply implausible that Scholz could not recall his conversations with President Warburg.

“Scholz should also show what he actively did to address Warburg’s involvement in the Cum-Ex transactions,” he said. “It is his political responsibility.”

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Reporting by Sarah Marsh and Andreas Rinke; Additional reporting by Hans Seidenstuecker and Jan Schwartz; edited by Andrew Cawthorne and Toby Chopra

Our standards: The Thomson Reuters Trust Principles.

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