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the Research Department concluded that foreign partner taxes and
royalties were costs deductible from income.
In April 1992, in memorandums concerning the 1981-1982,
1982-1983, and 1983-1984 years, Ismail confirmed that EGPC was
allowed to deduct royalties and foreign partner taxes, as a cost,
but not as a credit against taxes.
On April 14, 1992, the ETD issued "revised" notices of
assessment (Forms 19), for the 1981-1982 to 1983-1984 tax years,
disallowing a credit for royalties and foreign partner taxes.
By letter dated May 2, 1992, the Research Department
informed the head of the Tax Department for Joint Stock Companies
that a determination had been made, with the approval of the
chairman of the ETD, that EGPC was not entitled to a tax credit
for royalties and foreign partner taxes. ETD's determination
applied to all Egyptian production sharing agreements and to the
deductibility of both royalty payments and foreign partner taxes.
On May 6, 1992, Lenahan suggested to Pitman that they brief
Banbi as soon as possible in light of the audit controversy. A
May 6, 1992, draft of talking points for a meeting with Banbi
reflects an intent to discuss the following: (1) The IRS concerns
about EGPC taking a credit; (2) the finding that both Craig and
Leithy had intended a deduction; (3) Leithy's suggestion that
Amoco approach Banbi and request that EGPC change its practice to
conform to the intent of Craig and Leithy, and that Leithy
intended to contact Banbi directly, on such issue; (4) the
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