Turkey Fines BP Unit $275 Mln For Tax Law Breach

BP, which operates Turkey`s second-biggest chain of petrol stations, was notified late on Tuesday of the fine, the BP source said.

The Turkish government has fined a local unit of oil major BP 474 million lira ($275 million) over a tax breach but the company plans to appeal, a BP source in Istanbul told Reuters on Wednesday.

The fine, which followed an investigation into BP's sales of duty-free fuel at Turkish border crossings, is comprised of 170 million lira in back taxes with the rest in penalties and interest, a finance ministry official confirmed.

BP, which operates Turkey's second-biggest chain of petrol stations, was notified late on Tuesday of the fine, the BP source said.

"The tax office sent us a notice by official letter yesterday at 5 p.m. that they wanted 474 million lira in taxes allegedly unpaid, penalties and interest," the source told Reuters.

The company confirmed in a statement that it had been handed official fine papers, though it did not mention the size of the fine.

Turkey levies some of the world's highest gasoline taxes, and a gallon of gas currently costs about $1.70 per litre, of which as much as 60 percent is taxes.

Another BP official told Reuters that tax inspectors believe the retailer broke a legal limit on the amount of duty-free fuel it can sell to vehicles traveling outside of the country at filling stations on the Greek and Bulgarian borders.

The tax authority now wants BP to pay special consumption and value-added taxes for each vehicle that purchased more than 550 litres of fuel between 2006 and 2008, the BP official said.

BP argues that regulations set the "standard tank capacity" as the basis for the amount of tax-free fuel that can be sold and that it did not breach the limit, he said.

The London-based company is hoping to negotiate a settlement for the fine or will pursue legal means to appeal it, he said.

Besides petrol stations, BP also operates a $3.7 billion oil pipeline in Turkey, which carries Azeri crude to the Mediterranean port of Ceyhan.

BP and other Turkish petrol retailers last month won a legal challenge against a combined 1.6 billion lira fine by the energy markets regulator for allegedly selling fuel to unlicensed outlets. BP's portion of that record fine was 70 million lira.

Bugun newspaper, citing unnamed tax officials, reported on Wednesday that the finance ministry is considering similar fines against other Turkish fuel retailers.