Orascom Construction Industries (OCI) refused to comment on reports that the tax authority is seeking EGP 36bn in taxes the company failed to pay after striking a deal with Lafarge.
A source in the tax authority confirmed that the sale of Orascom cement production unit to the French Lafarge is subject to profit taxes estimated by the authority at EGP 13.6bn, or EGP 36bn after interests and penalties, reported state-run Al-Ahram.
“First, they were EGP 14bn and now they are asking for EGP 36bn,” wondered Omar Darwazah, investor relation manager at OCI.
A meeting was held last week between the company’s officials and the finance minister Almorsy Hegazy to discuss the matter that was lately referred to the latter in the presence of a representative from Morsy’s presidency.
Darwazah commented that the meeting was not conclusive but the negotiations are still ongoing, expressing his hopes that a compromise will be reached soon.
In 2007, OCI established its subsidiary Orascom Building Material Holding (OBMH) to handle the cement line of business, listing it in the stock market in October of the same year. Two months later the company announced a deal with Lafarge to sell the new company for EGP 71bn.
The tax authority determined that OCI avoided paying profit taxes by listing OBMH to benefit from the tax exemption granted to stock market operations. The company defends its position confirming that its actions were legal.
In his 6th of October speech last year, President Morsy vowed to investigate OCI-Lafarge deals along with five other companies that, according to him, owe the state EGP 100bn in taxes.
The company owned by Egyptian tycoon Nassif Sawiris expects a transaction backed by Bill Gates to transfer its shares into the Amsterdam based OCI NV, as reported by Bloomberg last week. Orascom said it is the biggest foreign investment since the 25th of January Revolution that toppled president Moubarak.
A new round of negotiations is expected to take place next week between the Ministry of Finance and OCI officials to settle the matter, Darawazah said.