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German coalition blocks Scholz tax fraud probe

German lawmakers on Wednesday blocked an investigation into Chancellor Olaf Scholz over his possible involvement as mayor of Hamburg in a tax fraud scam that cost the government millions of euros.

Published: 6 July 2023 09:16 CEST

German Chancellor Olaf Scholz

German Chancellor Olaf Scholz (SPD) speaks at a gathering of the SPD parliamentary group in Berlin. Photo: picture alliance/dpa | Kay Nietfeld

The probe, pushed for by MPs from the conservative opposition CDU and CSU, would have explored whether political figures helped the private bank M.M. Warburg to avoid paying back falsely claimed tax rebates in Hamburg.

MPs from the coalition parties, including Scholz’s Social Democrats, the Greens and the pro-business FDP approved a motion rejecting the plans.

The CDU and CSU said their rights as the parliamentary opposition had not been respected, and signalled they would appeal the move at the German constitutional court.

Scholz, who was mayor of Hamburg from 2011 to 2018, has repeatedly been forced to reject allegations he was involved in the decision to let the bank off the hook.

READ ALSO: Germany’s Scholz denies influence in tax fraud probe

The chancellor is already facing a similar parliamentary inquiry in Hamburg, one of Germany’s 16 federal states.

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 Warburg over so-called cum-ex trades.

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

Used across Europe, the tax scheme is estimated to have left a multibillion-euro hole in Germany’s public finances.

READ ALSO: German court jails three ex-bankers in tax fraud scam

The scam has seen dozens of people indicted in Germany, including bankers, stock traders, lawyers and financial consultants.

Warburg eventually had to pay back tens of millions of euros under pressure from the federal government under former Chancellor Angela Merkel.

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Germany, Czech Republic accuse Russia of cyberattacks

The accusations come at a time of strained relations between Moscow and the West following Russia’s 2022 invasion of Ukraine and the European Union’s support for Kyiv.

German Foreign Minister Annalena Baerbock said a newly concluded government investigation found that a cyberattack targeting members of the Social Democratic Party had been carried out by a group known as APT28.

APT28 “is steered by the military intelligence service of Russia”, Baerbock told reporters during a visit to Australia.

“In other words, it was a state-sponsored Russian cyberattack on Germany and this is absolutely intolerable and unacceptable and will have consequences.”

APT28, also known as Fancy Bear, has been accused of dozens of cyberattacks in countries around the world. Russia denies being behind such actions.

The hacking attack on German Chancellor Olaf Scholz’s SPD party was made public last year. Hackers exploited a previously unknown vulnerability in Microsoft Outlook to compromise e-mail accounts, according to Berlin.

Berlin on Friday summoned the acting charge d’affaires of the Russian embassy over the incident.

The Russian embassy in Germany said its envoy “categorically rejected the accusations that Russian state structures were involved in the given incident… as unsubstantiated and groundless”.

Arms, aerospace targeted: Berlin

German Interior Minister Nancy Faeser said the cyber campaign was orchestrated by Russia’s military intelligence service GRU and began in 2022. It also targeted German companies in the armaments and aerospace sectors, she said.

Such cyberattacks are “a threat to our democracy, national security and our free societies”, she told a joint news conference in Prague with her Czech counterpart Vit Rakusan.

“We are calling on Russia again to stop these activities,” Faeser added.

Czech government officials said some of its state institutions had also been the target of cyberattacks blamed on APT28, again by exploiting a weakness in Microsoft Outlook in 2023.

Czech Interior Minister Rakusan said his country’s infrastructure had recently experienced “higher dozens” of such attacks.

“The Czech Republic is a target. In the long term, it has been perceived by the Russian Federation as an enemy state,” he told reporters.

EU, NATO condemnation

The German and Czech findings triggered strong condemnation from the European Union.

“The malicious cyber campaign shows Russia’s continuous pattern of irresponsible behaviour in cyberspace, by targeting democratic institutions, government entities and critical infrastructure providers across the European Union and beyond,” EU foreign affairs chief Josep Borrell said.

The EU would “make use of the full spectrum of measures to prevent, deter and respond to Russia’s malicious behaviour in cyberspace”, he added.

State institutions, agencies and entities in other member states including in Poland, Lithuania, Slovakia and Sweden had been targeted by APT28 in the past, the statement added.

The latest accusations come a day after NATO expressed “deep concern” over Russia’s “hybrid actions” including disinformation, sabotage and cyber interference.

The row also comes as millions of Europeans prepare to go to the polls for the European Parliament elections in June, and concerns about foreign meddling are running high.

Czech Foreign Minister Jan Lipavsky told AFP that “pointing a finger publicly at a specific attacker is an important tool to protect national interests”.

One of the most high-profile incidents so far blamed on Fancy Bear was a cyberattack in 2015 that paralysed the computer network of the German lower house of parliament, the Bundestag. It forced the entire institution offline for days while it was fixed.

In 2020, the EU imposed sanctions on individuals and entities linked to the APT28 group over the incident.

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