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borrowers-to-be theory and to negotiate a longer relending period
for the phase III DFA, they were unwilling to make any change in
the Central Bank's tax immunity. In their comments, the Brazilians
also advised the BAC that about 75 percent of the phase III debt to
be restructured was not subject to withholding tax because it was
governmental debt.
Lastly, we reject petitioner's contention that Article 19 of
the Brazilian Constitution does not prohibit the Brazilian Federal
Government from taxing the assets, revenues, and operations of
Federal-level autarquias, like the Central Bank, as Article 19,
petitioner maintains, precludes taxation only between the different
governmental levels. Although some of petitioner's experts did
give opinions to that effect, we agree with respondent's expert
Tostes that such an interpretation of the constitutional tax
immunity of public-sector entities is contrary to the provisions of
Article 19, and is an unreasonable and questionable construction of
Article 19.39 If petitioner's interpretation of Article 19 were
39 Article 19 of the Brazilian Constitution provides, in
pertinent part:
Article 19. The Union, the states, the Federal
District, and the Municipalities, are forbidden to:
* * * * * * *
III. Establish a tax on:
a. The assets, revenues, or services of one
another.
* * * * * * *
(continued...)
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