German Chancellor Olaf Scholz faces lawmakers’ questions this week about his role in fighting billions of euros in tax fraud.

Known as “cum-ex” or dividend forfeiture, the scheme allows banks and investors to trade shares in companies quickly before and after the dividend payment date, obscuring ownership of the shares and allowing multiple parties to pay dividends. Allows you to erroneously reclaim tax refunds for

The now-closed loophole has snowballed into a political scandal, with prosecutors investigating the scheme in Hamburg, where Mr Scholz was former mayor, stating €200,000 in the coffers of local politicians. It was rekindled by recent headlines about finding cash.

Probes have long occupied vast dimensions. About 100 banks on four continents and at least 1,000 suspects are involved, government officials say. The Scholz government is facing an uphill battle amid rising energy costs and growing public dissatisfaction following Russia’s invasion of Ukraine.

On Friday, Scholz is scheduled to meet with the Hamburg local council. They reason that when Scholz was mayor local authorities moved and the Treasury Department’s intervention was necessary to demand the return of millions of euros earned under a scheme by Warburg, an important local authority. are investigating the bank.

Scholz has dismissed proposals to intervene politically on behalf of the bank, but local lawmakers say the issue remains unresolved.

MMWarburg is one of many German banks that have used the cum-ex scheme to claim tax refunds from the states for taxes they never paid.Photo: Morris McMatzen/Getty

“The suspicion of political influence must be dispelled,” said Christian Democrat politician Goetz Wiese, questioning Scholz. “Scholz must consider all the facts.”

During the 2021 election campaign, Scholz came under pressure over fraud at Wirecard, which subsequently went bankrupt. That didn’t derail his challenge for chancellor, but Fabio de Maci, a former German parliamentarian who investigated this and the Wirecard scandal, said it might be different this time.

“This incident could very well put Scholz in jeopardy,” de Masi said.

“The political environment is different now due to higher gas prices.”

In a survey conducted by Germany’s Welt TV, about 48% of respondents said past scandals “permanently damage” Scholz.

The chancellor has already met with Hamburg MPs last year and admitted he had a series of meetings with the then-Chairman of Warburg, saying he could not remember the details, but that he would use his influence as mayor to repay the money. He denied being late.

“This has been an issue for two and a half years,” Scholz recently told reporters. “Tons of files have been examined, counts of people have asked. The results are always: There was no political ramifications.”

cache stash

However, the incident has made headlines again in recent weeks.

State investigators investigating tax fraud found more than €200,000 in cash in a safe deposit box owned by a former Hamburg politician from the Social Democratic Party of Scholz, one person with direct knowledge of the investigation said. Said.

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

But the discovery, which was widely reported in the German media, will rekindle interest in the case and increase scrutiny of Scholz when he speaks on Friday.

In one of Germany’s biggest post-war frauds, authorities trying to hold individuals and institutions accountable and get their money back for government coffers have turned to local banks such as Morgan Stanley, Bank of America, and Barclays. I searched the office. A complex tax scheme mastermind was extradited from Switzerland and put on trial in Germany.

Warburg said he paid back the necessary taxes. Morgan Stanley and Barclays declined to comment. Bank of America said it was cooperating with the authorities.

Lawmakers and officials say the effort is far from over.

“Germany will still be many years away from solving this huge tax fraud,” said Milan Payne, a member of the Hamburg parliamentary committee that will interrogate Scholz.

Germany’s finance ministry told Reuters last week that the country’s 16 states had identified 3.9 billion euros in damages to taxpayers and 1.8 billion euros had been returned or were in the process of being returned.

But government tallies are nearly two years old, and experts say the real damage could be much higher.

Christoph Spengel, professor of international taxation at the University of Mannheim and member of the Ministry of Finance’s advisory board, estimates the total damages at up to 10 billion euros and said the practice of dividend stripping could still continue. .

The Hesse Ministry of Finance is based in Frankfurt, the country’s financial center, with 30 banks owing €527 million and having repaid €285 million to date. said.

The Bavarian state finance ministry told Reuters it had assessed 746 million euros in losses caused by seven banks. Lenders have so far repaid him 347 million euros.

Germany’s state-owned banks were also participating in a dividend stripping scheme to pocket tax refunds.

Stuttgart-based LBBW, the largest state-owned bank, said it had repaid 166 million euros in taxes it received and were wrongfully charged in 2007 and 2008.


Court Allows Payment From Wirecard Liquidated Me…

Generally, banks acted as creditors to investors, brokering transactions and cashing in fees or refunding taxes they were not entitled to.

The Cologne public prosecutor was particularly active in pursuing the case. A representative said it is currently investigating 50 international and domestic financial institutions and brokers.

In 2020, two British bankers were sentenced to suspended prison terms and one was fined €14 million.

Earlier this year, another bank employee, a former employee of the MM Warburg Group, was sentenced to prison. The judge said that as his director of managing the Warburg investment firm, he helped establish two funds to profit from the deal.

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