Egypt's top prosecutor calls for committee to assess OCI's tax position

Ahram Online, Thursday 7 Mar 2013

As technical committee prepares to assess Orascom Construction Industries' tax position, Egyptian Tax Authority claims to have documents proving firm should pay taxes on 2007 sale to Lafarge

OCI Chairman and CEO Nassef Sawiris
OCI Chairman and CEO Nassef Sawiris (Photo: AO)

Prosecutor-General Talaat Ibrahim has ordered the formation of a technical committee tasked with looking into a recent finance ministry report in which Egypt's Orascom Construction Industries (OCI) is accused of tax evasion, Al-Ahram's Arabic-language news website reported Thursday.

The move follows charges that OCI failed to pay LE14 billion (roughly $2 billion) in taxes on the $12 billion sale of its subsidiary, Orascom Building Materials Holding (OBMH), to French cement giant Lafarge in 2007.

The technical committee, which will function under the auspices of the government's anti-tax evasion unit, will send its assessment of the dispute – which has already impacted OCI's share prices – to the prosecutor-general, who will then take the appropriate legal steps, according to Al-Ahram.

Earlier this week, Ibrahim slapped a travel ban on OCI Chairman and CEO Nassef Sawiris, and his father, former company chairman Onsi Sawiris, effectively barring the two men from leaving the country.

On Monday, OCI stated that the Egyptian Tax Authority (ETA) had asked the company to pay LE4.7 billion (roughly $0.7 billion) related to its sale of OBMH, but stressed that it had not received any additional requests.

Tax Authority confidence

On Thursday, ETA head Mamdouh Omar announced that the authority had in its possession documents proving that OCI should pay taxes on its earlier sale to Lafarge.

Omar explained that the ETA had requested that OCI pay LE4.7 billion, based on a tax statement filed by the company in 2007. According to Omar, the statement proves that the sale had been worth around LE22.8 billion (roughly $3.4 billion) rather than LE68.6 billion (roughly $10 billion).

Al-Ahram's Arabic-language news website said it had obtained a copy of the statement.

Omar went on to stress that, while the deal had appeared to be a stock market transaction (and therefore exempted from taxes), it had in fact represented a corporate acquisition, and as such should have been subject to taxation.

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