Doğan outlines its strategy

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Doğan outlines its strategy
Oluşturulma Tarihi: Şubat 21, 2009 00:00

ISTANBUL - The chief financial officer of the Doğan Media Group outlined his strategy to fight a half billion dollar tax levy imposed by the company yesterday, saying the company is readying for a legal battle to last two to seven years.

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"The government says this results from an objective audit," said Soner Gedik. He repeated the company’s argument of recent days that the allegations are baseless, and intended only to damage the company.

"This levy is selective. No other comparable major taxpayers have been subjected to this level of scrutiny and no one else in the media sector has been audited," Gedik told a press conference.
Gedik outlined the legal and administrative process the company intends to follow. He said the company has 30 days to file its legal appeal and will fight any efforts to force payment of the fine into any kind of escrow account pending resolution of the case. The fine, 826 milion TL, is larger than the entire market value of DMG.

He added that the company’s long history of paying record taxes will augment its legal argument to avoid any preemptory lien. Last year, the Doğan Group which employs 24,000 people paid more than $1.5 billion in taxes.

The charges against the company are that DMG carried a sales execution of shares in a subsidiary agreed in 2006 into 2007 in a move that amounts to criminal fraud. The company has repeatedly pointed out that the law specifically required the company to transfer shares and funds on the same date. Equally important, company officials point out, a change of date had no tax implications whatsoever.

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Int’l media reaction to Doğan fine

The German publication Frankfurter Rundschau ran this article under the headline "Turkish war on press escalates." A tax fine of 826.3 million Turkish liras has been imposed on Turkey’s largest media company Doğan Media. Vuslat Doğan Sabanci, head of the media group, said, "A fine of this dimension is an attack against the freedom of press."

For months a grim conflict between the Doğan group and Turkish Islamic-conservative Prime Minister Tayyip Erdoğan has been taking place.

The Doğan group has reported alleged scandals in the Justice and Development Party, or AKP, including alleged links between the party and the German scandal about donations to the Islamic charity Lighthouse e.V.

With the current fine, tax officials wants to punish alleged irregularities in the sale of shares of the media group to the German media company Axel Springer. The amount of the fine is immense and surpasses the net profit of the group in 2007. It strikes at the heart of the company.

British daily Financial Times on Feb. 19 ran this article under the headline "Turkish group in $408m tax fine." Once again, Turkey's largest media group has fallen foul of the Turkish authorities, incurring a $408 million tax fine. The fine is related to the sale of a 25 percent stake in Doğan TV to the German publisher Axel Springer. It is imposed at a time when its advertising revenues are decreasing and its parent Doğan Holding wants to expand in other sectors.

Shares of the media group fell 17.7 percent, while shares in its parent fell 14.1 percent. Investors fear that the group could be suffering from a conflict between Aydin Doğan and Turkey's prime minister, Recep Tayyip Erdoğan.

IPI Turkey slams gov’t

The Turkish branch of the International Press Institute (IPI) Friday issued a statement concerning the present situation between the government and the Turkish media. The statement reads:

"The pressure directed at the free and independent press in our country continues with methods never seen before. The most recent has been to seek to apply pressure on financial investments under the guise of tax penalties. It shows openly that the astronomical penalty applied to the Doğan Media Group and its effect on the company’s present market value aren’t just to penalize the company but the purpose is also to eliminate the largest press group in the country. The situation is understandable as these things materialized at a time when Prime Minister Recep Tayyip Erdoğan has shown that he has targeted the Doğan Media Group.

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