Riggs National Corporation & Subsidiaries (f.k.a. Riggs National Bank and Subsidiaries) - Page 48

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               There is no room for any change as regards *  *  *  [the               
               Central Bank's] tax immunity.  As on Phases I and II,                  
               withholding tax receipts shall only be provided to the                 
               creditors for the initial period during which the amounts              
               remain deposited with the Central Bank for relending to                
               borrowers in Brazil (Relending Period), based on the                   
               concept of "borrowers to be". No withholding tax shall be              
               collected on amounts redeposited with the Central Bank as              
               a result of the relending flexibility referred to above,               
               as occurs with other similar deposits held by the Central              
               Bank.  Politically speaking, there is no ground for any                
               material change in the Brazilian withholding tax system,               
               when Mexico negotiated their debt rescheduling without                 
               having to make any change on their fiscal policies.  In                
               fact, around 75% (US $36 billion) of the total amount of               
               debt to be rescheduled (US $48 billion) is exempt from                 
               withholding tax on the grounds of being considered                     
               governmental debt.                                                     
               Furthermore, were the Central Bank to provide the                      
               creditors with tax receipts during the Relending Period,               
               this would disencourage [sic] the relendings themselves,               
               with negative consequences over the necessary regular                  
               flow of funds for the financing of the Public and Private              
               Sectors.  As to the subject of withholding tax on loans                
               with Phase III funds, the possibility of determination of              
               a higher limit (over 10 years) for withholding is under                
               consideration and tax exemption shall be dealt with                    
               altogether with the level of spread.  It must always be                
               kept in mind that it is essential to keep in relation                  
               both the domestic interest rates and the financial costs               
               of external borrowing.  The increase in the latter will                
               lead to an increase in domestic interest rates, in real                
               terms, which is detrimental to the economic development                
               and to the degree of freedom of monetary policies.                     
          S.  Central Bank's Payment of Withholding Tax on Its Restructuring          
          Debt Interest Remittances and the Caixa Unico System                        
               In Brazil, Banco do Brazil, which among other things operated          
          as a commercial bank, was the Brazilian National Treasury's agent           
          for payment of taxes.  During the years in issue, the Central Bank          
          collected and paid over to Banco do Brazil, for the account of the          
          National Treasury, withholding taxes, export taxes, taxes on                
          financial operations, and social security taxes.  The withholding           



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