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purposes. Amoco Egypt initially proposed that it pay its own
Egyptian income taxes out of its share of the oil. EGPC rejected
this proposal, primarily because, among other things, the
arrangements under the prior agreements offered EGPC the
opportunity to obtain the foreign exchange benefit of obtaining
dollars for oil and paying Amoco Egypt's taxes in local Egyptian
currency. At EGPC's insistence, the tax provisions of the 1973
Esso agreement were used as the model for the tax provisions of
the MCA.
In a letter dated April 22, 1975, Amoco Egypt responded to
EGPC's March 3, 1975, request for negotiations and outlined the
essential terms of an agreement, one of which was that "AMOCO's
income-tax liability, grossed up, would be paid out of EGPC's 80
per cent share of profit oil." Leithy reviewed the April 22,
1975, letter and initialed the English text concerning Amoco
Egypt's proposal regarding its taxes.
In an August 4, 1975, letter from Craig to Leithy, Craig
summarized Amoco Egypt's understanding of EGPC's position with
respect to certain matters, including that Amoco Egypt's income
would be computed on a gross-up basis. Craig stated such gross-
up would not adversely affect EGPC's interest "since EGPC is
entitled to deduct from EGPC's gross income the A.R.E. income
taxes of AMOCO paid by EGPC." Leithy placed his initials next to
the English version of the above declaration.
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