Turkish company assets frozen

The Ministry of Revenue froze the assets of Turkish multinational, Yapi Merkezi, when it failed to pay 2.1 billion birr in unpaid taxes. The company undertook the 389km long Awash-Kombolcha-Hara Gebaya Railway Project at a cost of USD 1.7 billion. The Ministry also ordered the Ethiopian Railway Corporation (ERC) to deposit any money to the revenue office that the company claims.
“The project is more than 80 percent completed and the payment is prorated,” Dereje Tefera Head of Information and Public Relation of ERC told Capital. “But we received a letter from the Ministry.”
“During his latest visit to Istanbul President Mulatu Teshome discussed the specific issue with his counterpart Recep Tayyip Erdoğan,” the company’s attorney Abebe Balcha told Capital. “We are expecting a state level decision to be in favor of us,” he said. “We paid our taxes and the issue is the bilateral relationship between the governments.”
Murat OCAL, the country manger of the company in Ethiopia, stated that the current issue is misinterpretation of the Turkish Export Import (EXIM) Bank Loan Agreement between Turkey and Ethiopia. He further expressed confidence that this would soon be corrected.
The Turkish government via its EXIM Bank provided a loan worth USD 300 million for this project, which is the biggest ever loan that the Turkish government provided for foreign government, while the balance USD 1.4 billion dollar is covered by European financers such as Switzerland’s Credit Suisse.
“We are looking forward to the proper consideration and awaiting an executive decision,” Murat told Capital.
The company was asked to pay 2.4 billion birr but after it took the case to the tax appellate bench in the Ministry it was reduced to 2.1 billion birr. The Ministry of Finance and Economic Cooperation in its comment said the audit is correct and must be implemented.
The actions were taken after long negotiations over the last year which involved the Ministry of Foreign Affairs, the Turkish Embassy, and delegates from Turkey.
Yapi Merkezi is among the ten railway and transit contractors in the world.
A month ago the assets of China Communications Construction Company (CCCC) Ltd were frozen because an audit determined they owed back taxes.
The company later paid 760 million birr out of the 3.9 billion birr owed and appealed 1.8 billion birr to the Ministry’s Tax Appeal Committee.
The Ministry found 412 million birr in the Chinese construction giant’s frozen account.
The Ministry gave one month for CCCC to settle the payment prior to freezing the assets. Also when Prime Minister Abiy Ahmed (PhD) went to China he raised the issue to the Chinese Government officials, according to sources close to the case who also revealed that his efforts did not achieve the desired result so far.
The state owned multinational said they would make a payment prior to the seizure but failed to pay on time. The CCCC was asked to settle evaded profit tax, reverse taxation, withholding and vat for the last two years.