Egyptian-based multinational Orascom Construction Industries has been cleared of tax fraud allegations following an announcement by its Dutch parent company, OCI NV that it had been “fully exonerated” by a public prosecutor.
Orascom – owned by Egyptian billionaire family Sawiris – was accused by former President Mohammed Morsi of evading tax on a deal involving the sale of Orascom Cement to French Lafarge for $12 billion. The sale required Orascom to pay tax worth $2 billion.
Reports suggested the Egyptian group found and exploited loopholes in tax laws. Rather than sell the cement company directly to Lafarge, it was listed on the stock exchange and shares were sold to Lafarge, granting it a tax exempt status. This generated a mass outrage over the amount that went untaxed.
Orascom was subsequently charged with tax evasion and reached a settlement to pay the government LE7.1 billion in ten instalments. The first instalment of $360 million was duly paid, but the second was suspended following an appeal resurrected by tax disputes with the government.
However with the allegations cleared, Orascom will save over $1 billion formerly reserved as provision for the settlement. It is also expected that the multi business group might seek a refund for previous payments.