In WSJ Turkish finance prome minister defend for the tax issue of Dogan TV. He mention that Turkey is not banana republic. I want to ask him is it really a corporate defence since I couldn’t find any technical information on that defence. By the way is he the prime minister on banana republic
Turkish Finance Minister Plays Down Company Tax Case
By MARC CHAMPION
ISTANBUL — Turkey’s finance minister gave a passionate defense of his country’s courts and tax system, insisting that a $3.2 billion back-tax case against the Dogan Yayin Group was “purely technical.”
“This country is not a banana republic,” said Mehmet Simsek, speaking to reporters at the close of the International Monetary Fund’s annual meeting. “There are strong institutions and those institutions are not new. There has been absolutely no attempt to politically influence this process.”
Mr. Simsek also said Turkey hasn’t set a date to restart talks on a loan facility with the IMF. He repeated Turkey’s position that while it would like to have a new standby agreement with the fund, it wants the loan to support the government’s own medium-term economic program, rather than a program set out by the IMF.
The former Merryll Lynch banker also said he didn’t believe Turkey would need to go to the markets for substantial new borrowing, arguing that having survived the worst of the economic crisis, it seemed unlikely the government would need to do so now.
The Dogan group is a conglomerate with media, petroleum and other assets that controls about 50% of Turkey’s media outlets. It says it is being targeted unfairly and that the case is baseless. The company was fined $2.5 billion last month, a figure that has since risen to $3.2 billion.
On Friday, Turkey’s revenue administration, which reports to Mr. Simsek, is due to decide on whether to reject an appeal by the Dogan group against a demand for collateral against the full amount of the fine, plus interest and penalties, while it is challenged in court. Turkey’s courts frequently rule against the tax authorities in such cases.
If the tax administration rejects the appeal, the Dogan group will have the right to request an injunction against imposition of the collateral in court. But the company has said it is concerned the collateral requirement could force it out of business. Collateral is typically required in tax cases to ensure that targets of a claim don’t dispose of assets to avoid payment.
The Dogan group has been increasingly at odds with the government of Prime Minister Recep Tayyip Erdogan in recent years. In an interview with The Wall Street Journal over the weekend, Mr. Erdogan also rejected the suggestion that the case was political, comparing it to tax-evasion charges that the U.S. brought against Al Capone in the 1930s.
The Dogan group settled one case of unpaid back taxes related to its petroleum business for $200 million last year. A further one for $500 million this year remains unresolved. The latest case brings the total claims against the company to $4 billion.
Mr. Simsek said he couldn’t discuss any details of the case, due to confidentiality rules. But his frustration at the way the case is being portrayed in the media was evident. The European Union has expressed concern over the implications of the case for press freedoms in Turkey.
“This is a purely technical case,” Mr. Simsek said. He added that it was only one of many the government has launched in order to crack down on widespread tax evasion. Turkey has one of the lowest corporate and income-tax receipts, as a percentage of gross domestic product, among members of the Organization for Economic Development and Cooperation.
“The tax system is a very important one for investment,” said Mr. Simsek. “in cases like this, we are not going to allow them to … portray the investment climate as other than it is.”
The final charge against a company found to have evaded taxes is often for the lost tax alone, with interest — charged at 30% — and penalties forgiven.
Write to Marc Champion at email@example.com