Investigators are looking into whether political leaders - among them Olaf Scholz - pressured Hamburg's municipal tax office into waiving tens of millions of euros in tax fees.
German Chancellor Olaf Scholz is to be grilled by a local parliamentary enquiry committee on Friday about the "CumEx Files" scandal, a tax fraud on dividends that has shaken his premiership.
The Social Democrat leader will appear before the committee in Hamburg on Friday afternoon into the complex fraud, which was first revealed in 2017.
The CumEx scandal involves an ingenious tax optimisation scheme set up by banks that allowed foreign investors to reduce their taxes on dividends and the committee in Hamburg will want to know the extent of any involvement by Scholz, who was the city's mayor at the time.
Scholz - who previously served as Germany's finance minister from 2018 to 2021 - has denied any wrongdoing.
Dozens of people have been indicted in the case in Germany, including bankers, traders, lawyers and financial advisers. A total of ten countries are involved.
Among the banks charged is Warburg in Hamburg, which should have paid €47 million to the German port city, but the municipality waived this in 2016.
The bank eventually had to pay back tens of millions of euros under pressure from Angela Merkel's government.
Investigators are looking into whether political leaders - among them Olaf Scholz when he was mayor - pressured the municipal tax office into waiving the taxes.
"I can't tell you anything about that," government spokesman Steffen Hebestreit said earlier this week, assuring that Scholz would answer all the committee's questions.
The decision to waive the repayment of the sums owed by the Warburg bank was apparently taken shortly after a conversation between Olaf Scholz and Christian Olearius, then head of the bank.
Scholz denies, however, that he put pressure on the tax officials of the city of Hamburg, which he headed between 2011 and 2018.
But these newly revealed information could undermind the denials of Angela Merkel's successor.
Several media outlets have revealed in recent days that emails from a person close to Mr Scholz had been seized by investigators and would provide "potentially conclusive" evidence about "thoughts on data deletion".
This email 'damns' Mr Scholz, the daily Frankfurter Allgemeine Zeitung said.
At the home of another SPD member of parliament, who may have played a role in the bank's reimbursement, investigators discovered more than €200,000 in cash in a safe deposit box, fuelling suspicions of possible hidden financial arrangements.
Other documents seized also suggest that Mr Scholz, contrary to what he has claimed so far, would have raised the subject of repayment directly with Christian Olearius.
The opposition has thus jumped into the breach to criticise the leader of Europe's largest economy.
"The latest revelations suggest that Olaf Scholz and his direct entourage took pains to provide only limited information about certain meetings or telephone conversations (...) or to deliberately conceal them in order to protect the current chancellor," said Matthias Hauer, a Conservative member of the Bundestag's Finance Committee.
These revelations are, in his view, "politically explosive".