Death By Taxes

Is the Turkish government trying to break the back of the media group that has served as its most vocal opposition by slapping it with a whopping $2.5 billion tax penalty? I’m not an accountant, but there certainly seems to be something suspicious about the record-breaking fine levied on the Dogan Media Group, which publishes several powerful newspapers (Hurriyet, Milliyet and Radikal among them) and owns CNN-Turk, the Turkish-language version of CNN, among other channels. The penalty (which equals the entire value of the company) comes on the heels of a $500 million tax fine issued against Dogan a few months ago. According to Turkish tax officials, Dogan has engaged in deceptive practices and has failed to pay tax on income earned through the sale of a company and through the transfer of shares between companies within the group itself. According to the Dogan Group, everything has been above board and the government, through its taxmen, is out to get it by twisting the country’s financial rules to suit its purposes.

First, the background: Over the last few years, the Dogan group’s media outlets have emerged as perhaps the most vocal critics of the ruling Justice and Development Party (AKP). At one point, Turkish Prime Minister Recep Tayyip Erdogan even called for his supporters to boycott the group’s publications. Interestingly, relations between the AKP and the media group turned especially sour after some of the Dogan publications aggressively reported on the gross financial misdeeds committed by the German branch of a Turkish Islamic charity with close ties to the AKP leadership.

So, is the Turkish government involved in a Putin-esque attempt to silence one of its critics, as part of a larger plan to create compliant media? That’s certainly the view of the people working for the Dogan Group. In a column in Milliyet, Fikret Bila, the newspapers’s Ankara representative and one of Turkey’s leading veteran journalists, says this:

This never, ever seen arbitrary tax penalty is beyond imagination. Without any legal ground, such a practice could not be welcomed anywhere in the world. It was not even seen during the Ottoman Sultanate. Even sultans did not exploit state authority so much.

These two consecutive tax levies are nothing but “tax terror” against the company owner, Aydın Doğan. Motives are not only picking up back-taxes. This is obvious. They are not only additional income for the Treasury. That’s for sure. But it is rather confiscation of Doğan companies. These two fines clearly show that the purpose is Mr. Doğan’s bankruptcy.

What is saddening here is that tax officials committed misconduct. Unfortunately tax officials vulnerable to such temptations are casting shadows over this well-respected duty.

The Doğan Group will soon be asked to return all its assets to the state due to such astronomically high tax fines levied by the said tax officials. This is obviously a confiscation process, not just tax penalties.

The government, in its defense, says the massive fine is simply the result of tax inspectors doing their job.

There really are no clear-cut heroes or villains in this affair. Aydin Dogan, chairman of the Dogan organization, is not a scrappy newspaperman fighting for his life, but rather a media baron and business magnate who is a kind of Turkish Rupert Murdoch, controlling a very large slice of the Turkish media scene. As Andrew Finkel points out in an excellent recent column in Today’s Zaman:

As Turkey's press baron extraordinaire, [Dogan] openly promoted his allies and intimidated his foes to carve out a world favorable to himself. He confessed as much in an interview I once did for TIME magazine in which he defended his papers' support for a press law which actually restricted freedoms of expression but which allowed his media holding to be more aggressive in expanding his share of the television market. Why, he asked me, should he cut off his nose to spite his face?

Mr. Doğan was used to cultivating governments, and in the days of weak coalitions, his support mattered. Many regard the 1995 general election in Turkey as a proxy fight between the Doğan Group and Sabah rather than the parties on the ballot paper. Before entering a (failed) coalition with Tansu Çiller, Mesut Yılmaz went to consult with Doğan and the two remained allies. This in itself was not a crime (Tony Blair paid similar sorts of homage to Rupert Murdoch). However, the Doğan Group was persistently criticized for rendering paper thin the firewall between editorial independence and financial self-interest. Ertuğrul Özkök, the editor of the flagship Hürriyet newspaper, proudly wore two hats -- that of a journalist and that of a member of the board who could happily negotiate incentives from the government for factories his parent company was trying to build.

That said, the recent developments are troubling. I would be more comfortable with the possibility of the government taking the Dogan Group down if there existed a truly independent press in Turkey that could step in and fill the vacuum that would be created. That, unfortunately, is not the case. As I have written before, Turkey’s deeply domestic political polarization has worked its way into the country’s media. Whatever the sins of the Dogan Group’s outlets, the pro-government press (Zaman and it’s English-language affiliate Today’s Zaman, in particular) have not distinguished themselves in recent years, showing a disturbing willingness to be used as tools for spreading disinformation. (You can check out previous media-related posts here.)

Tax officials and Dogan are apparently entering negotiations that might lead to a settlement of some kind, although it’s hard to imagine the government backing down too far on this. Whatever happens, it certainly could cost Turkey, both domestically and abroad, raising questions of press freedoms in the country. The European Union, which Turkey hopes to join, has already expressed its concern, with a spokesman in Brussels saying the other day: "When the sanction is of such magnitude that it threatens the very existence of an entire press group, like in this case, then freedom of the press is at stake.”