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foreign partner taxes and royalty expenses from its income for
purposes of its profit/loss statement, but had restored foreign
partner taxes to its income on its income tax return. Ismail, in
his audit report, restored the royalty expense to EGPC's income,
as EGPC itself had done for foreign partner taxes. The audit
report did not address whether EGPC was entitled to a tax credit
for royalties or foreign partner taxes. An assessment form (Form
19), dated December 27, 1990, for the 1984-1985 tax year does not
indicate an allowance of a tax credit.8
For the 1985-1986 tax year, also audited by Ismail, a notice
of assessment (Form 18), dated December 5, 1991, shows an
adjustment in EGPC's income in the amount of foreign partner
taxes and royalties paid by EGPC. The notice does not provide
for a tax credit for royalties or foreign partner taxes.
For the 1986-1987 tax year, Ismail prepared an audit report
denying EGPC a deduction from income for either royalties or
taxes paid on behalf of foreign partners. Ismail cited Article
114 of Egyptian Law No. 157 of 1981 for the proposition that
corporate tax is not a deductible cost. The notice of assessment
for the 1986-1987 year (Form 18) does not provide for a tax
credit.
In October 1991, Ismail met for the first time with Ahmed
Momtaz, an employee of Amoco Egypt responsible for coordinating
8 Ismail testified that the credit was disallowed, which is
consistent with the absence of the credit on the assessment form.
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