A handful of energy firms affiliated with Koc Holding, owned by one of Turkey's most prominent business families, were raided by tax authorities late last month, prompting some the company's shares to plummet.
The raids occurred shortly after Prime Minister Recep Tayyip Erdogan criticized Koc-held Divan Hotel for supporting anti-government unrest for opening its doors to protesters fleeing police tear gas during weeks of violent anti-government demonstrations in Istanbul's Gezi Park.
Now Turkey's business community and some analysts warn that the seemingly suspicious timing of the tax probes, regardless of whether they were politically motivated, threaten the country's investment reputation at a time of increasing financial uncertainty.
"Koc Holding is in several sectors—it is more than a company or market leader, it is at the center of the industry. It accounts for roughly 11 percent of Turkey’s GDP," said Atilla Yesilada, an analyst for political consulting firm Global Source Partners. "Attacking this company at a time when investors are really having second thoughts about emerging markets investments is simply not very rational. And the timing is very conspicuous. It happened right after Erdogan said to Koc Holding, 'You will pay for this.' And if you read the pro-AKP [political party] media, Koc is accused of plotting to bring this government down."
According to government figures, direct international investment in Turkey has fallen significantly in the past year. With expectations that anti-government protests could reignite this fall, Yesilada warns of a broader crackdown on the business community.
"It frightens me to think that it’s only the start," he said. "It will get worse, as I expect social unrest to continue in the fall and winter, then the witch hunt in the corporate community will also re-double and it will really cost Turkey."
But Finance Minister Mehmet Simsek insists the investigation is not politically motivated, noting on the social media site Twitter that the tax investigation board conducts 50,000 probes each year.
Still, observers point out it's not the first time tax investigators have audited a business leader who angered the prime minister, pointing to a 2007 investigation of media tycoon Aydin Dogan, which resulted in a multi-billion dollar tax fine, after one of Dogna's newspapers accused the ruling AK Party of corruption.
The Koc probe has also provoked alarm among business leaders who are close to the AK Party, including Mustafa Boydak, who currently serves as Member of Management Board at Boydak Holding and Chairman of Kayseri Chamber of Industry. According to a July 28 report in The Hürriyet Daily News
, Turkey's oldest extant English-language daily, "Boydak is a prominent Anatolian businessman based in the Central Anatolian province of Kayseri, also the hometown of the President Abdullah Gül, and is known to have a close relationship with the president."
"The government shouldn’t take sides in its issues with the business realm, and we shouldn’t relive the 1990s as some circles have been claiming. You all will remember the Feb. 28 process," The Hürriyet
quoted Boydak as saying, apparently delivering a thinly veiled warning to the government over the Koc tax probe.
The "February 28 process" was the military coup that deposed former Islamist Prime Minister Necmettin Erbakan in 1997. What followed was a crackdown on Islamic groups and their companies, forcing many out of business.
Analysts warn that a continuing investigation of the Koc conglomerate is likely to reinforce doubts about whether Turkey is a safe place to invest.