Oil report

UPDATE 1-Turkey's Dogan says fine increased to $3.2 bl

* Dogan tax fine increases with late-payment penalties

* Fine reaches $3.22 billion

* Top editor at leading Dogan paper resigns (Adds detail, background)

ISTANBUL, Sept 28 (Reuters) - Turkey’s largest media group Dogan Yayin said on Monday it was officially notified of an increase in a tax fine to 4.8 billion lira ($3.22 billion), as penalties mount in a case that has cast doubts on the European Union candidate country’s commitment to press freedom.

Tax authorities issued a notice to Dogan Yayin DYHOL.IS of its fine for alleged tax irregularities at its publishing units between 2005 and 2007, the company said in a stock exchange filing on Monday.

The original fine, announced on Sept. 8, was a record $2.5 billion. Dogan Yayin has appealed, and a company official told Reuters on condition of anonymity the 29 percent increase was due to interest and penalties.

It could increase again with any further delays, he said.

Dogan Yayin, which controls half of the Turkish media market, has accused the government of singling it out because of critical coverage of Prime Minister Tayyip Erdogan’s Islamist-rooted AK Party. The government denies this.

The European Commission said this month the fine threatened press freedom in Turkey and could damage its bid to become the first Muslim member of the EU.

Erdogan has denied any political motivation, and billionaire media tycoon Aydin Dogan has been accused of using his newspapers to further his business interests.

Meanwhile Sedat Ergin, the editor-in-chief at leading Dogan daily Milliyet and an outspoken critic of the ruling AK Party, has stepped down, Dogan Yayin said separately on Monday.

Ergin will now write a column at sister publication Hurriyet, according to the statement from Hanzade Dogan Boyner, a daughter of Aydin Dogan and a member of the board at parent company Dogan Holding DOHOL.IS.

A senior Dogan editor, who declined to be named, told Reuters the move will help make its newspapers more “professional”.

“Milliyet has been very critical of the government and that is likely to be toned down now with Ergin gone,” he said.

“This move is not so as to please the government, but more to realign the company to improve its financial position, but of course this is all linked to the ongoing pressure Dogan is under from the government,” he said.

Sources both close to the company and the government have said they believe a compromise can be reached on the tax fine.

The size of the fine has threatened the survival of Dogan Yayin and Dogan Holding, which also has interests in energy. The combined market value of both companies is $2.4 billion.

Dogan Yayin was separately fined $500 million in February for alleged improprieties connected to the sale of a stake in a television unit to Germany's Axel Springer SPRGn.DE [ID:nLI334101].

Last week Dogan Yayin said authorities asked it to provide a 4.8 billion lira collateral on the original fine within 15 days.

“What’s now important is whether the Finance Ministry accepts the collateral Dogan offers,” said Tuncay Tursucu, an analyst at Meksa Investment in Istanbul.

“Until that’s clear the pressure on (Dogan) will continue.”

Dogan Yayin shares, which were already lower, fell on the news and closed down 2.8 percent at 1.04 lira, bringing its losses since it first announced the fine to 37 percent.

Dogan Holding fell 2.7 percent. (Reporting by Birsen Altayli, Paul De Bendern and Ayla Jean Yackley; Editing by Rupert Winchester)