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of the MCA provided EGPC with a deduction from gross income for
royalties and the Egyptian taxes that were paid on Amoco Egypt's
behalf. Such understanding was based variously and cumulatively
on the plain language of the English version of the MCA, the lack
of knowledge that the Arabic was possibly different than the
English, the internal symmetry of the MCA, and the August 4,
1975, letter of principles, supra p. 19.
On September 5, 1979, Amoco submitted a request to the IRS
for a ruling on the creditability of Amoco's Egyptian income
taxes based on certain proposed changes to the MCA as follows:
1. Amendment of the MCA to delete all provisions
relating to Amoco Egypt's income tax liability,
including the provision under which EGPC assumes
responsibility for paying Amoco Egypt's tax
liability, and to state simply that Amoco Egypt is
subject to Egyptian income tax laws and shall
comply with those laws.
2. Addition of the Petroleum Production Incentive
Allowance ("PPIA") to reflect the additional
economic burden assumed by Amoco Egypt for its own
tax liability.
3. Clarification that Amoco would become directly
liable for payment of its income taxes from
Amoco's funds.
4. Provision for the establishment of certain rules
to clarify how the Egyptian income tax laws apply
to the oil and gas business.
Due to Leithy's refusal, the ruling request did not assume
that EGPC would apply the modified tax provisions to non-U.S. oil
companies. This provided an element of doubt to Amoco regarding
U.S. creditability.
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