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taxes the Central Bank collected and paid over included withholding
tax on the salaries of its employees and withholding tax on its
interest remittances to foreign lenders.
Prior to 1980, the Central Bank made tax payments to Banco do
Brazil by issuing an administrative check. The check would be
physically delivered to Banco do Brazil and then cashed through the
normal check liquidation and payment procedure. Beginning in 1980,
there was a change in the manner by which the Central Bank made tax
payments to Banco do Brazil. Rather than issuing an administrative
check, the Central Bank credited Banco do Brazil's Banking Reserves
Account at the Central Bank with the amount of the tax payment.
By law, all commercial banks were required to maintain a
Banking Reserves Account at the Central Bank with a minimum balance
equal to 20 percent of their demand deposits. Banco do Brazil,
however, was not subject to this requirement because the Central
Bank would, on a frequent basis, credit and advance substantial
funds to Banco de Brazil's Banking Reserves Account, due to the
governmental functions and operations Banco do Brazil carried out.
Until 1965 when the Central Bank was formed, Banco do Brazil
served as the country's sole monetary authority. During the times
relevant to this case, Banco do Brazil was owned 51 percent by the
Brazilian Government and 49 percent by private shareholders. From
1965 through 1986, Banco do Brazil had four primary functions: (1)
A commercial bank, (2) a monetary authority, (3) management control
and distribution of currency, and (4) responsibility for bank
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