Algerian tax authorities have rejected a second appeal by Orascom Telecom Algeria against a tax reassessment for the years between 2004-2007 which resulted in a demand for $596.6m in penalties and back taxes.
The rejection on Thursday means the Algerian subsidiary of the Egypt-based international telecoms operator, Orascom Telecom Holding, has exhausted all avenues for appeal directly to the tax department. Orascom Telecom now says it will challenge the reassessment in Algeria’s administrative court.
According to OTH, the Algerian tax authorities calculated its total revenue for the three years at $5.25bn versus the audited figure of $4.42bn.
The company said the methodology used to reconstitute its accounts was “completely arbitrary and groundless”. It argues that it was tax-exempt during the years in question and would have had no incentive to under report its revenue.
The company has also said that its accounts had been audited and approved by both the international auditors of Orascom Telecom Algeria and its statutory local auditors. Last month OTH raised $800m in a rights issue that was fully subscribed and which had been launched to strengthen the company’s balance sheet in preparation for the dispute over the Algerian tax claim.
The Algerian subsidiary is the largest contributor to the revenue of OTH which operates in a dozen countries where it serves 93m subscribers. Last year Algeria accounted for just over half of the company’s earnings before interest, tax, depreciation and amortization from its GSM operations.
Total ebitda was $2,238bn of which Algeria contributed $1,067bn. Net profit in 2009 was $318m down 26 per cent on the year before. OTH said last month that its fourth-quarter results registered a net loss of $46m because of a tax in Pakistan and losses in Algeria where mobs had attacked and destroyed assets belonging to the company after football violence broke out between Algerian and Egyptian supporters.
In the last two years Algeria has veered towards economic nationalism, tightening conditions for foreign investors with new regulations including restrictions on the repatriation of some of the profits made by companies which benefited from tax exemptions.
Naguib Sawiris, the chairman of the OTH wrote in his introduction to the company’s earnings release issued last month that the group was keen to stay in Algeria, but that it needed “to understand if our investment is welcome there or not. If not, we will consider other options.”
Via FT
