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Bank in June 1980, and was consistent with certain prior decisions
of the Brazilian Supreme Court that are discussed more fully
hereafter. Pursuant to SRF 368, the Central Bank (which in Brazil
serves an instrumental role in ensuring that the withholding tax
due on interest remittances abroad is collected), following its
issuance of FIRCE 80 in May 1981, did not require withholding tax
to be collected from and paid by public-sector entities, like
itself, on their net loan interest remittances abroad. Beginning
in 1984, the Central Bank purportedly paid withholding tax on its
restructuring debt interest remittances during the relending
periods of the DFA's and the CGA's, pursuant to the borrowers-to-be
theory applied in the March 1984 Brazilian IRS private ruling
issued to the Central Bank.
C. Brazilian Supreme Court Decisions
The following Brazilian Supreme Court decisions are apposite
in understanding the respective arguments of the parties and their
experts concerning the Central Bank's liability for the payment of
withholding tax on its net loan interest remittances to foreign
lenders.
On September 24, 1974, a panel of the Brazilian Supreme Court
issued its unanimous decision in Federal Govt. v. Highway Dept. of
the State of Parana (hereinafter referred to for convenience as the
Parana I--1st Panel decision), reversing the decision of the lower
Brazilian Federal Court of Appeals and holding that the State of
Parana was required to pay withholding tax on its remittance of
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