Egyptian tycoon Naguib Sawiris blames 'cowardly' minister for tax dispute

Ahram Online, Tuesday 30 Sep 2014

Egypt's third richest man demands investigation of tax authority, plans investments in renewable energy, transport logistics and recycling projects

Nassef and Naguib Sawiris
Nassef and Naguib Sawiris (Photo: Al-Ahram)

In a television interview Monday night, Egyptian billionaire Naguib Sawiris slammed the government's handling of his brother Nassef's ongoing tax dispute with authorities.

Nassef Sawiris, a billionaire construction tycoon, was sentenced in absentia for failing to pay a second installment due to the Egyptian Tax Authority as part of a settlement reached last year after he was charged of tax evasion in a case Naguib described as "fabricated."

"Even the current finance minister, if he wasn't cowardly– he knows that this tax is fabricated, and does not have any legal basis, as all of his advisors told him, and yet he left things in this mess," Naguib, Egypt's third richest man, told talk show host Lamis El-Hadidy on Egyptian private satellite channel CBC.

"If your conscience is clear, and you know that this tax is fabricated, and politically motivated, you are supposed to refuse that this money goes to the state; these sums are ill-gotten," he said, referring to the installment of LE2.5 billion ($0.36 billion) that OCI already paid in May 2013.

Though the prosecutor-general cleared OCI of any wrongdoing or charges of tax evasion in February, a Cairo misdemeanor court in July sentenced Nassef in absentia to three years in jail and fines worth LE50 million.

According to Naguib, officials did not abide by procedures in settling the tax dispute, prompting his brother to challenge the settlement in court.

"I want the finance minister to issue a statement saying how much in commissions the head of the tax authority and other members of the authority gained from this…millions were made in commissions," said Naguib, while demanding an investigation.

Ayman El-Kaffas, spokesman for the finance minister, declined to comment on the accusations when contacted by Ahram Online.

Tax Authority head Mostafa Abdel-Kader could not be reached for comment.

Last year, under ousted president Mohamed Morsi's rule, Egypt's finance ministry charged Nassef's OCI with evading LE14.4 billion ($2 billion) in taxes on the sale of its subsidiary Orascom Building Materials Holding (OBMH) to French cement giant Lafarge in a deal worth $15 billion.

The sale was executed on the Egyptian Stock Exchange, which at the time did not tax gains made from bourse transactions.

"OCI did not evade taxes; it simply sidestepped them by listing OBMH – technically an OCI subsidiary – on the Egyptian stock exchange in 2007, all the shares of which it sold to Lafarge," one analyst familiar with the matter told Ahram Online last year on conditions of anonymity.

But other financial analysts who spoke to Ahram Online at the time explained that the fact that OCI seems to have listed OBMH specifically for the transaction made the case more complicated.

Naguib, an outspoken critic of Morsi's rule and founder of the secular, liberal Free Egyptians Party, has maintained that the move was politically motivated.

The dispute was eventually settled with Egypt's Tax Authority, with Nassef agreeing to pay LE 7.1 billion to the authorities in installments until 2017, under pressure from his exiled elderly father, Onsi.

"Nassef did it because his father told him…I cannot live like this, outside Egypt, I am 84 years old…I don't want the money…I want to return to Egypt."

Egypt's prosecutor-general had placed a travel ban on Nassef and his father Onsi, founder of OCI, while they were both overseas, pushing them into self-imposed exile.

Asked about his investments in Egypt, Sawiris said he was going to invest in the construction of a solar-powered electric plant with a production capacity of 50 megawatts (50 MG) in the Upper Egyptian governorate of Aswan as well as an even larger plant with foreign investors, the cost of which he did not disclose.

Sawiris is also considering a recycling plant, with the possibility of a spin-off bio-fuel power station. A third project involves a port near the Alexandria port to lighten the burden on the existing one.

"I want to focus on projects which have not been done before, that create jobs and have a patriotic element," said Sawiris.

The tycoon defended himself from accusations that his family had withdrawn their investments from Egypt – which circulated under Morsi's rule.

"We are still the largest Egyptian investor in Egypt," Sawiris said about his family, including his billionaire father and brothers.

Sawiris reduced his stake in the Egyptian Company for Mobile Services (Mobinil), which he founded in 1998, to 5 percent in May 2012, selling more of his stake to majority holder France Telecom.

Last year, Egypt's largest-listed company Orascom Construction Industries, of which Naguib's brother Nassef was the founder and CEO, was almost wholly acquired by Dutch holding company OCI N.V.

The moves prompted criticism of the Sawirises in the Egyptian media on charges of abandoning the country when the January 2011 uprising and its aftermath had decimated its economy.

Nonetheless, Sawiris said that withdrawing investments from Egypt was justified given the treatment to which his family was subjected by the authorities while Morsi was in power.

"What was done to us was not little," he said.

*Correction: In an earlier version, Ahram Online wrote that "Even the current finance minister, if he wasn't hesitant – he knows that this tax is fabricated ..."

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