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29 September

Many birds; one stone


Tax penalties on the Doğan media group

(this article first appeared in Turkish in T24 / 25 Eylül 2014)

“... The New Turkey has set itself goals for 2023, then for 2053 and 2071; in these somewhat revolutionary times, the state broadcaster Turkish Radio and Television (TRT) must now manage to take on new and effective roles in the name of the nation... In particular, TRT must be the guiding light during the process of establishing the media of the New Turkey. Turkey has reached its potential in one leap, in a way that arouses envy among both friend and foe alike; now it is time for TRT to make that same leap.
“Our country is swiftly closing the gap with the world in every area and will do the same in the media. The  ‘New’ TRT will take its place in the New Turkey.

The passage above comes from Akşam newspaper (22 September 2014) and was written by Cengiz Özdemir, who was placed at the head of the Çukurova Media Group after it was seized by the Savings Deposit Insurance Fund (SDIF) in 2013 to repay the parent group’s public debt.  In November 2013 this media group, which includes Akşam and Güneş newspapers, the Sky360 TV channel, five magazines and two radio channels, was famously sold to Ethem Sancak, a businessman close to President Tayyip Erdoğan, for 62 million dollars.  
Sancak is a man who once announced that he became involved in the media “to support the AKP mission”;  who described Erdoğan as “my biggest idol, I am enamoured of him”; and who joined the AKP executive board at the party’s Fourth Congress in 2012.

Cengiz Özdemir, the hero of our story, is currently the chairman of Ethem Sancak’s Türkmedya Group that includes the publications listed above. He is also the lead columnist at Akşam, a newspaper that fired dozens of its writers and reporters; and has a programme at Sky360, a channel that showed many journalists the door. Özdemir, also served in Erdoğan’s team during his term as Istanbul Metropolitan Municipality Mayor, and has also written for the newspapers Hürriyet, Radikal and Vatan, as well as for Zaman, the newspaper of Erdoğan’s now sworn enemy, the Gülenists.

Özdemir, managed to summarise the “new media of the new Turkey”,  and it is probably due to the fact that he is not a journalist that he is still able to speak of the “process of establishing the media of the New Turkey”.  When it comes to TRT, the public channel has already achieved great work as the “new TRT of the new Turkey”.  For example, during the election campaign TRT allocated Erdoğan 204 minutes of airtime, and only three minutes over a period of days to the opposing candidates!

Indeed, the “new media of the new Turkey” has already been built by those close to the government, enlisting those outside this close circle at virtual knifepoint. That knife used was at times the tax administration, at others the Banking Regulation and Supervision Agency. It was that same agency which President Erdoğan called upon on to seize the Gülen affiliated Bank Asya, describing it as  “already bankrupt”.

In conclusion, as we witnessed from the “Hello Fatih” recordings –leaked conversations in which then Prime Minister Erdoğan was twisting the arms of media executives to cover the news according to his specifications—the “new media” in Turkey is already under construction.  It takes the form of the recent (as has been termed) “pooled” media – where proprietors chip into to buy media groups as the price of doing business with the government. However, the construction itself has a much longer history.
What was the total in taxes and fines imposed on the Doğan group?
Think back to 2009. Remember the taxes and fines imposed on Doğan Yayın Holding following stories of corruption related to the Deniz Feneri (Lighthouse) association. What was the total, in lira, that was imposed on the Doğan Media Group in taxes and fines?

1 billion?

2 billion?

3 billion?

In the two waves of tax penalties imposed in 2009, the amount imposed on the Doğan Media Group in taxes and fines came to a total of 6.5 billion lira. 6 quadrillion, 448 trillion lira in old money equal to some 3 billion dollars.

To get some perspective on this figure, remember that in 2009 Turkey’s total budget revenue was 215 billion lira. As you read this figure remember that in 2008 the SDIF sold the Sabah-ATV group to Çalık Holding, headed by Tayyip Erdoğan’s son-in law Berat Albayrak, for 1.1 billion dollars. And don’t forget that 750 million of this 1.1 billion dollars was financed by loans from Halkbank and Vakıfbank. The fact that the Sabah-ATV group, which had printed not a single word to anger the government in years, was sold to Ahmet Çalık, a businessman in Erdoğan’s inner circle and thrown into the government’s media pool is another story about the “new media of the new Turkey”.
Almost 6.5 billion in two waves

We mentioned that 6.5 billion lira. Considering that the figures could become inflated as they are rounded up, let’s take a look at a detailed breakdown that will show us the real situation:

18 February 2009 – First Wave:  The first calculation by the Ministry of Finance of taxes and fines to be paid by the Doğan group came to a total of 826 million lira. The justification given for this figure was that the capital gains tax on the sale of 25% of the shares of Doğan Yayın Holding’s Doğan TV to the German group Axel Springer for 365 million Euros were paid not at the end of 2006 but in a late payment in 2007.

6 September 2009 – Second Wave:  The Ministry of Finance claimed that the companies had not paid corporation tax on the incremental release of new shares within Doğan Yayın Holding during the sale of the Doğan TV shares to Axel Springer. The following taxes and fines were imposed on three companies included in the incremental release of shares:

Taxes/Fines: 2 billion 8 thousand lira
Default interest: 700 million lira
Total:  2 billion 700 million 8 thousand lira
Taxes/Fines: 863 million lira
Default interest: 465 million lira
Total: 1 billion 328 million lira
Taxes/Fines: 1 billion 114 thousand lira
Default interest: 480 million lira
Total: 1 billion 594 million lira
Second wave total: 5 billion 622 million lira
Total of first and second waves: 6 billion 448 million 8 thousand lira 

Why is this important?
I gave this breakdown for a reason. I gave this breakdown because I asked all the journalists I knew –  including those working for the Doğan group – and not a single one of them knew the total figure in taxes and fines imposed on Doğan Yayın Holding in 2009. Even the closest guesses were only half the actual total.
The reasons for this are important. A certain group followed this calculation of the biggest tax/fine/interest penalty in the history of Turkey with relish, saying that the Doğan group deserved everything it got for all it had done over the years. Another group, among which were many members of the business world, kept silent in fear of repercussions from the government. Another group, which included journalists, avoided the issue in the worry that they would be labelled as supporters of the Doğan group. As a result, the issue was not followed up and these huge figures did not receive as much public attention as they deserved.
The issue here, however, is not the sins of the past of the Doğan group and of the publications within the group, nor is it the fact that the group did not undergo a routine tax inspection. The real issue is the fact that the government used the tax administration to attack a particular media group.
Negotiations, payment and the rest 

So let’s take a look at what happened next...

Doğan Yayın Holding sat down at the negotiating table with the Ministry of Finance. The Doğan group originally faced the prospect of taxes and fines to the value of almost 6.5 billion lira, but as a result of negotiations it was decided that instead of this sum the group would pay 1 billion 200 million lira to the treasury. Following these negotiations, the Doğan group paid the state the sum of 1 billion 200 million lira in June 2011.

So was that the end of the matter?

Not in terms of the “construction of the new media”! During this time the Doğan group sold off Petrol Ofisi and other subsidiaries, as well as the Milliyet and Vatan newspapers. Erdoğan Demirören, the new owner of Milliyet and Vatan picked up the phone and called the then Prime Minister Tayyip Erdoğan to ask whom he should put in charge of publications! This isn’t idle rumour. We learned it from Tayyip Erdoğan himself. Let me remind you of the statement Erdoğan made to journalists on 21 March 2013:
“After the purchase Erdoğan (Demirören) asked me ‘Who would you recommend?’ I recommended Akif (Beki) who was at that time leaving Kanal 24…”
Emerging from the need to minimise the influence of the Doğan group in the media, we therefore gained another malleable media boss who addressed the Prime Minister over the phone as “boss” and broke down in tears, and who showed the door to dissenting journalists, in particular the paper’s most influential and popular columnist Hasan Cemal because he defended the cause of journalism and later the popular Can Dündar.
During this time a strong message was given to media bosses, meaning that many birds were killed with one tax penalty.
But this article should also address those who ask the question whether we were better off in the bad old days when the Doğan group had a monopoly on the press. Of course there was much abuse then too. There were headlines which set a lynch mob on musicians, or compared the result of a democratic parliamentary decision to a descent into chaos. You don’t need to be a journalist to condemn the lobbies against the prohibition of media bosses entering public tenders or the media cartels.
But is the only alternative to this nurturing – with taxation as a weapon – of a media that is now a slave to the government? And is it acceptable for the tax administration to be used as the government’s stick, and for “routine” inspections not to pay a visit to the publications of the government side?
Now it is the Taraf newspaper that is undergoing the inspection process, as is Bank Asya (on the side of the Gülen movement), which Erdoğan tried to have seized with the command “it’s bankrupt anyway”.
That’s right, 6.5 billion lira.
As you read this story remember Erdoğan’s telephone conversations about who should be president of the Court of Cassation and who should head the administrative court that hears tax cases and acts as the court of appeal.
No matter how much you read, there will always be more stories.
One day we will learn where the money came from for this “new” media order. One day we will learn who had these columns written – as easily as writing out a cheque – and for what reward.


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