TURKEY: AMBASSADOR PRODS D/PM ON DOGAN MEDIA FINE

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 001497 SIPDIS DEPARTMENT ALSO FOR EUR/SE E.O. 12958: DECL: 10/15/2019 TAGS: PHUM PGOV TU SUBJECT: TURKEY: AMBASSADOR PRODS D/PM ON DOGAN MEDIA FINE REF: A. ANKARA 1425 ¶B. ANKARA 1327 Classified By: DCM Douglas Silliman for reasons 1.4 (b,d) ¶1. (C) SUMMARY. In an October 14 discussion with the Ambassador, Deputy PM Arinc defended the tax evasion fine against the Dogan Media Group as simply a move by GOT auditing agencies to tackle the unregistered economy and eliminate "off-record" dealings. He portrayed Dogan as a powerful corporate entity long accustomed to using its considerable political leverage, but noted that in his view the GOT had made a mistake in pursuing Dogan's tax liabilities because "politicians should not be openly feuding with the media." He was confident the Finance Ministry would offer Dogan a payment deal. END SUMMARY. ¶2. (C) On October 14 the Ambassador hosted a lunch for Deputy Prime Minister Bulent Arinc and used the opportunity to underscore USG concerns about the massive fine which GOT tax authorities have levied against the Dogan Media Group (REFTELS). The Ambassador said the technical details of the alleged tax evasion case against Dogan are a legal issue that is best left to the judicial system, but that the size of the fine itself has created a worrisome impression about press freedom in Turkey. Whatever the GOT's actual intentions, he said, the appearance is negative. He noted that the recent EU report had called for proportionality and fairness in such tax cases, to avoid undermining the economic viability of the Dogan Group and curbing press freedom in practice. ¶3. (C) Arinc replied at length, first describing Dogan Media Group as a "very large" and powerful entity with a wide range of corporate activities, from petrol stations to newspapers. It has exerted considerable political leverage and, after helping to install Mesut Yilmaz as Prime Minister in the mid-1990s, has acted as if it could make or break any Turkish Government, he said. Aydin Dogan had openly challenged PM Erdogan last November. He had threatened to disclose "certain documents." Dogan's daughter, TUSIAD President Arzuhan Yalcindag, had also attacked PM Erdogan, comparing him to Russian President Putin and alleging that there are no press freedoms in Turkey. ¶4. (C) Arinc contended that the main problem, however, as reflected in the Dogan case, is the unregistered economy and the need to eliminate "off-record" dealings. In addition to the Ministry of Finance, he said, Turkey has supervisory and auditing agencies, which regularly carry out audits and can initiate investigations on their own, or upon receiving complaints. These agencies draw up a report and present it to the taxpayer who is being examined. The taxpayer then either accepts the allegation or tries to come to a negotiated agreement with the Ministry of Finance. The Ministry may decide to offer a "discount" of up to one-third of the fine. Or the taxpayer may appeal to the Council of State (Danistay) or the relevant tax court. However, in order to make an appeal at the court, the taxpayer must first make a deposit -- which is a set percentage of the original fine. This is what is proving to be a problem for the Dogan group. ¶5. (C) Still, Arinc added, in his view the Government "had made a mistake" in pursuing Dogan. "Politicians should not be openly feuding with the media." He remembered a saying from his service in the military: there are eggs and there are hammers; when the hammer hits the eggs, the hammer never gets hurt. The media could be considered as a hammer. Arinc said the Government would "patch things up" with Dogan. The Government's conscience would not allow it to annihilate such a big group. He was confident the Finance Ministry would offer Dogan an option. "This has been a bitter experience for us," he said. "We should not have reciprocated their disgraceful attitude." ¶6. (C) COMMENT: Arinc's depiction of the Dogan Media Group as a political powerhouse that had "challenged" PM Erdogan provides some insight into how AKP views the media conglomerate -- as the enemy -- and seems to lend credence, inadvertently, to assertions that this is more than just a tax evasion case. He also seems to imply that the initial fine was levied with the understanding that it would be eventually negotiated downward, and that the GOT is now amenable to making a deal. The continuing clamor over the Dogan case and its press freedom implications may have convinced the ruling AKP that the case has become more of a liability than it envisioned, and that it is time to move on. JEFFREY "Visit Ankara's Classified Web Site at http://www.intelink.s ANKARA 00001497 002 OF 002 gov.gov/wiki/Portal:Turkey"