German Chancellor Olaf Scholz, in his testimony before the Hamburg Parliament’s investigative commission, denied suspicions of involvement in tax fraud in the so-called cum-ex case, AFP reported on Friday, August 19.

“I had no influence in the fiscal process with the MMWarburg bank. There was no political influence,” Scholz said. The chancellor called the accusations “hunches and innuendo” which “obviously are not supported by anything or anyone”.

Scholz appeared before the committee as part of an ongoing investigation into a 2016 corruption scandal. At that time, the Hamburg tax authorities waived MMWarburg’s €47 million refund claim in relation to cum-ex transactions. These Latin prepositions are used on the stock exchange to describe a stock in a company before (cum) and after (ex) the payment of dividends.

Cum-ex blow mechanism

The essence of the scam was that, during the resale of a large block of shares in the company on the day the dividends were paid, several participants in the scam petitioned the German tax authorities for compensation for allegedly paid taxes. According to the scheme developed, several people received at once a certificate entitling them to a tax refund. As a result, the 25% tax on dividends was paid once, and the supposedly paid tax money was returned by the state twice or even multiple times, as it was difficult for tax authorities to determine who exactly owned the bonds.

The coup was the biggest tax scandal in German history. The total amount of budget losses was estimated at €30 billion for 2001-2016 alone. Dozens of people were charged, including bankers, stockbrokers, lawyers and financial advisers.

Why Olaf Scholz Was Involved in the Scandal

In 2016, the Hamburg tax authorities demanded that the Hamburg private bank MMWarburg return €47 million in tax on cum-ex transactions. But a few days later they refused to collect. At that time, Scholz served as the city’s mayor. Investigators are now investigating whether there was political influence on tax structures.

The local opposition then launched a parliamentary investigation, during which it was discovered that Scholz remained silent about the meeting with the bank’s management precisely on days when the municipal tax authorities demanded a refund of the tax. After the MMWarburg co-founder’s journals reached investigators, Scholz admitted to the meetings. At the same time, he categorically denied his influence on the tax authorities’ decision. “That would be political stupidity, and I am not inclined toward stupidity,” he said in an April 2021 speech to members of the parliamentary committee investigating the MMWarburg case.

The Hamburg Prosecutor General’s Office saw no reason for Scholz’s suspicions.

In February 2022, Hamburg lawyer Gerhard Strate filed a complaint “on suspicion of complicity in tax evasion”, including against Olaf Scholz.

The Prosecutor General’s Office rejected the statement as “unfounded”, thus confirming the decision of the Hamburg Prosecutor’s Office, which previously refused to open a criminal case. The Prosecutor General’s denial said that “there were not sufficient factual grounds to suspect that the alleged tax evasion by the MMWarburg bank was intentionally or voluntarily encouraged by responsible persons in Hamburg’s financial administration”.