'Baseless' levy on Doğan 'attack on press freedom'

The order to Doğan Media Group, or DMG, to pay 826.3 million Turkish Liras, or $490 million, came to light yesterday in a filing by DMG to the Istanbul Stock Exchange. It results from alleged carriage of receipts from a 2006 sale, of a 25 percent share in Doğan TV to a German media group, into 2007 as a means to avoid taxation.

“This is the levy of a fine against freedom of the press and democracy,” said Vuslat Doğan Sabancı, the chief executive officer of the Daily News and parent newspaper Hürriyet. “This has nothing to do with taxation.”

Government officials reportedly reason that a memorandum of understanding featuring tentative sales terms of 375 million euros in November 2006 amounted to tax evasion after the regulator-required due diligence process pushed the sale into January 2007. The closing memorandum, which triggered the transfer of shares and payment from Germany into a Turkish bank, occurred on Jan. 2, 2007 – the date the final sales agreement was executed.

While DMG paid a sum of some 30 million liras in accordance with tax rules on that date, the Treasury order alleges that the due diligence timetable was part of a plan for deliberate fraud.

DMG Chief Financial Officer Soner Gedik said the charges are baseless and without logic. First, he said, had the payment been made in 2006 under terms seen as proper by the Treasury, this would have violated Turkish commercial code restrictions on fund transfers in the absence of share transfers. He further noted that even if one assumed a sale executed in December rather than January, the total additional tax bill and any penalties would not be more than 4 million liras.

“But through this charge of fraud compounded by an allegation of criminal intent, plus the adding of interest and cleverly-constructed penalties, the levy the government is seeking to impose is on the order of 800 million liras,” Gedik said. “This is on a sale agreed between two publicly-traded companies made under the scrutiny of both German and Turkish regulators and under the due diligence laws and regulations of both countries.”

The Treasury offered no explanation or defense of its reasoning in the case yesterday.

Doğan Sabancı said what is at work is clear, noting the government last summer took even such drastic steps as demanding a boycott of all Doğan newspapers after Prime Minister Recep Tayyip Erdoğan characterized as “lies” the report of a politically allied charity in Germany convicted of fraud.

“For about 12 months, simultaneous investigations have been going on in Doğan Group companies, including our media companies. Yesterday, we learned of this assessment which is totally baseless, reprehensible and unprecedented in Turkish history,” said Doğan Sabancı. “This is a pure and simple attack to put pressure on our reporting and on freedom of the press in Turkey.”