(Refiles to correct share fall in fourth bullet point)
* Collateral to appeal $3.3 bln tax fine rejected
* Authorities freeze share sale rights
* Press freedom concerns to be raised by EU
* Dogan Yayin stock down 8.4 percent, underperforming bourse
(Adds EU report)
By Birsen Altayli
ISTANBUL, Oct 13 (Reuters) - Turkey's tax authority rejected collateral provided by Dogan Yayin to fight a record $3.3 billion tax fine, raising the stakes in a bitter stand-off between Turkey's largest media company and authorities.
The finance ministry's tax authority had, as a consequence, placed a preliminary injunction on the sale of shares in three of Dogan Yayin's units, a company spokesman said on Tuesday.
"Because Dogan Yayin's collateral was not accepted they made an injunction," the spokesman said.
Dogan Yayin, which controls half of the Turkish private media market, has accused the government of singling it out because of critical coverage of Prime Minister Tayyip Erdogan's government.
The AK Party government, which rejected this accusation, has, in the past, said Dogan newspapers and television channels were acting like an opposition party.
Government sources, who declined to be named, told Reuters the authorities may now seize Dogan Yayin units if so desired. The sources also said Dogan Yayin had the right to appeal the rejection of the collateral.
The state has in the recent past seized entire companies or assets of prominent businessmen. In 2007, the ATV-Sabah media group was seized for irregularities and sold for $1.1 billion.
Dogan Yayin shares fell 8.4 percent while Dogan Holding traded down 7.5 percent, compared with a slightly negative Istanbul main share index.
In a row that has raised concerns in the European Union, which Turkey wants to join, the dispute over alleged tax payment irregularities has put the spotlight on the government's commitment to press freedom and its taxation system.
The fine against Dogan Yayin has also drawn parallels with Russia's treatment of oil giant Yukos, which was crippled by a huge tax bill its owners said was politically motivated, undermining the country's investment climate.
EU CRITICISM
The EU will tell Turkey this week to treat Dogan Yayin fairly in the tax dispute, a draft report showed.
"The high fines imposed by the revenue authorities potentially undermine the economic viability of the group and therefore affect freedom of the press in practice," the draft EU said. "There is a need to uphold the principles of proportionality and of fairness in these tax-related procedures."
Turkey's finance minister, Mehmet Simsek, said last week the case was purely technical and to do with taxes, not politics.
Two senior members of Dogan Yayin's media units have told Reuters the company's parent, Dogan Holding, may be forced to sell key assets, possibly even exiting large parts of the media business. Dogan has declined to comment.
The fine, the largest ever for a Turkish company, has raised concerns about Turkey's investment climate, although analysts have said that, so far, the case looks isolated to Dogan.
Erdogan's government has pledged to crack down on tax evasion. More than half of Turkey's economy is unregistered.
Aydin Dogan has been accused of using his media outlet to further his business interest and campaign against Erdogan, whom secularists in Turkey suspect harbours an Islamist agenda.
In recent years, the business landscape has seen a marked change in Turkey with the emergence of a powerful conservative, pro-AK Party elite that has challenged the status quo held by a secular business elite, represented by a number of families such as Koc, Sabanci and Dogan.
"The business landscape is changing gradually and we will see more scrutiny of the business practices of the old Istanbul elite," the chief executive of one of Turkey's major companies told Reuters. He declined to be named. (Additional reporting by Orhan Coskun in Ankara and Marcin Grajewski in Brussels; Writing by Paul de Bendern; Editing by Dan Lalor and Simon Jessop)