Government source says Orascom dispute to end soon, company denies wrongdoing

The Tax Authority is about to reach a tentative reconciliation with Orascom Construction Industries to end a dispute over the company’s tax dues, a government official said on Sunday, but Orascom officials maintain that the tax allegations have no legal basis. 

The source said the Tax Authority had set an appointment for that day to discuss the matter.

Egyptian authorities had issued a travel ban for the company’s CEO, Nassef Sawiris, and his father, the company chairperson, on charges of a tax evasion of LE14 billion, relating to Orascom selling a subsidiary to the French Lafarge in 2007.

The official told Aswat Masriya website that the agreement ensures that Orascom pays LE5 billion in tax dues on the sale, and that the second round of negotiations would be on an additional LE4 billion for assets that were sold in the deal.

The source said that the payable fine could amount to much more than LE9 billion, up to LE18 billion.

In an 8 March press release, Orascom Construction Industries reiterated its position that the alleged tax claim is unfounded.

In the release, the company said that the sale of Orascom Building Materials Holding to Lafarge SA in 2007 is exempt of any capital gains tax because under Egyptian law all capital gains resulting from the sale of shares listed on the Egyptian stock exchange are tax exempt.

"The current dispute between the company and the [Egyptian Tax Authority]  is matter of differences over interpretation of the applicable tax laws and not a matter of tax evasion," the release said.

In the press release, the company also questioned the timing of the charges. The release said that it had consistently provided tax returns and relevant information to the government in the period since the sale took place.

"The company fails to understand how the ETA never brought to its attention an alleged tax claim on the transaction," it said.

The company also criticized the company for not carrying out necessary lawful procedures and following protocol. The tax authority, it said, has also failed to understand the nature of the transaction.

"The ETA claims that profits generated from the sale of OBMH should be considered as profits from a revaluation of the company’s assets and liabilities," the release said.  "OCI emphasizes that this is void and erroneous. It is clear that the ETA is trying to create a context for tax that does not exist and/or is not applicable." 

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