Turkey says $2.5 bln Dogan tax fine not political

ANKARA Mon Sep 14, 2009 9:53pm BST

Turkey's Prime Minister Tayyip Erdogan addresses his ruling Justice and Development Party (AKP) members during a meeting at the party headquarters in Ankara August 14, 2009. REUTERS/Umit Bektas

Turkey's Prime Minister Tayyip Erdogan addresses his ruling Justice and Development Party (AKP) members during a meeting at the party headquarters in Ankara August 14, 2009.

Credit: Reuters/Umit Bektas

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ANKARA (Reuters) - Prime Minister Tayyip Erdogan on Monday denied suggestions a $2.5 billion (1.5 billion pounds) fine imposed on Turkey's biggest media company was part of an attempt to put pressure on opposition media in the EU candidate country.

The record tax fine announced last week has raised concern among critics that the government is seeking to choke off Dogan Yayin for hostile coverage including corruption allegations and accusations it is introducing Islam into public life -- a breach of secular constitutional principles.

AK, with its large parliamentary majority, has extended its influence widely in the state apparatus since its election in 2002 and reduced the political power of the secularist military.

"I have no thoughts of applying political or economic pressure on the media, but certain media establishments have no right to see themselves above the law," Erdogan told ambassadors at a dinner he hosted, without specifically naming Dogan Yayin.

"Turkey is a democratic country. To take the issue to other platforms is propaganda, and it would be wrong to take it to the EU platform," he said in his first public statement on the fine.

The European Commission on Thursday condemned the fine and said it could affect the next annual progress report on Ankara's EU entry bid, due in October. AK denies any Islamist ambitions as it pursues European integration.

The penalty for alleged failure to properly pay taxes for share transfers between Dogan companies is the largest ever for a Turkish company and is equivalent to the combined market value of Dogan Yayin and its parent Dogan Holding. Dogan Yayin's annual sales are about $2 billion.

The biggest fine imposed by the EU's executive arm was 1.06 billion euros against Intel Corp in May.

Dogan Yayin, which controls more than half of the non-state media market, was hit with a separate 900 million lira (362.1 million pounds) in February.

OTHER MEDIA GROUPS EXAMINED

The Finance Ministry said on Monday accusations that Dogan Yayin had been singled out "are seriously disturbing.

"These baseless publications are seen as efforts to affect the probe and mislead the public ... Inspectors have not only examined Dogan Yayin Group firms but the great majority of the media sector and continue to examine," it said, without providing further details.

Shares in Dogan Yayin lost a third of their value last week but rebounded on Monday on hopes it will reach a compromise with the Finance Ministry over the amount of the fine, traders said.

Billionaire Aydin Dogan, majority owner of Dogan Yayin and fuel distributor Petrol Ofisi, says his companies face regulatory and legal obstacles, including being barred from a $5 billion crude-oil refinery project.

"Even if there is a legal basis for this fine, the authorities are probably interpreting the rules to the maximum disadvantage of Aydin Dogan," said Sahin Alpay, a professor at Istanbul's Bahcesehir University and columnist at Zaman daily, which is not owned by Dogan Yayin.

"The size and nature of the fine definitely raise suspicions that the ultimate aim is to crush this group who have so opposed the government."

On Friday, TUSIAD, an association of Turkey's main companies and whose current president is a daughter of Aydin Dogan, accused the Finance Ministry of bowing to political pressure.

The size of the fine has also raised concerns about Turkey's investment climate. The tax code is criticised as too ambiguous and open to interpretation, and the International Monetary Fund has called on Turkey to make its tax authority independent.

The AK Party government, in power since 2002, has stepped up tax inspections as it tackles the vast unregistered economy.

Opposition parties have accused Erdogan of seeking to muzzle Dogan Yayin. Earlier this year, Erdogan called on AK Party members to boycott Dogan press because of its coverage of the government, accusing them of fabricating stories.

Dogan newspapers and TV stations have prominently reported corruption allegations and what they said was evidence of the government seeking to bring Islam into public life. Their reports were used as evidence in a court case to close down the AK Party last year for anti-secular activities.

The party was fined but allowed to remain open.

Turkey is just now emerging from a period of sharp tensions between the secular establishment, including army generals, judges and parts of the business community, and the AK Party.

In recent years the business landscape has seen a marked change in Turkey with the emergence of a powerful conservative, pro-AK Party elite that has challenged the status quo held by a secular business elite, represented by a number of families, such as Koc, Sabanci and Dogan.

Dogan Yayin owns top-selling daily Hurriyet and co-owns with Time Warner the broadcaster CNN Turk.

(Additional reporting by Ayla Jean Yackley; writing by Paul de Bendern; Editing by Diana Abdallah)

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