Dogan faces setback in $3.3 billion Turkish tax row

Turkey's tax authority rejected collateral provided by Dogan Yayin to fight a record $3.3 billion tax fine, raising the stakes in a bitter stand-off between Turkey's largest media company and authorities. The finance ministry's tax authority had, as a consequence, placed a preliminary injunction on the sale of shares in three of Dogan Yayin's units, a company spokesman said on Tuesday.
Government sources, who declined to be named, told Reuters the authorities may now seize Dogan Yayin units if so desired. The sources also said Dogan Yayin had the right to appeal the rejection of the collateral. Dogan Yayin, which controls half of the Turkish private media market, has accused the government of singling it out because of critical coverage of Prime Minister Tayyip Erdogan's government. The government, which rejected this accusation, has, in the past, said Dogan newspapers and television channels were acting like an opposition party.
The state has in the recent past seized entire companies or assets of prominent businessmen. In 2007, the ATV-Sabah media group was seized for irregularities and sold for $1.1 billion. In a row that has raised concerns in the European Union which Turkey wants to join, the dispute over alleged tax payment irregularities has put the spotlight on the government's commitment to press freedom and its taxation system.
The fine against Dogan Yayin, threatening its survival, has drawn parallels with Russia's treatement of oil giant Yukos, which was crippled by a huge tax bill its owners said was politically motivated, undermining the country's investment climate. Turkey's finance minister, Mehmet Simsek, said last week the case was purely technical and to do with taxes, not politics.
Two senior members of Dogan Yayin's media units have told Reuters the company's parent Dogan Holding may be forced to sell key assets, possibly even exiting large parts of the media business. Dogan has declined to comment. The European Commission was expected to comment on the tax row when it presents its report on Turkey's progress towards EU membership on October 14.
Dogan Yayin shares fell 8.4 percent while Dogan Holding traded down 7.5 percent, compared with a slightly negative Istanbul main share index. The fine, the largest ever for a Turkish company, has raised concerns about Turkey's investment climate, although analysts have said that, so far, the case looks isolated to Dogan.
Erdogan's government has pledged to crack down on tax evasion. More than half of Turkey's economy is unregistered. Aydin Dogan has been accused of using his media outlet to further his business interest and campaign against Erdogan, whom secularists in Turkey suspect harbours an Islamist agenda.