- 85 -
correct, then a Brazilian State would be free to tax the assets,
revenue, and operations of other Brazilian States. Similarly, a
Brazilian municipality could tax other Brazilian municipalities.
Petitioner has cited no persuasive Brazilian legal authority for
this proposition. We further note other convincing evidence of
record. The Central Bank, following its issuance of FIRCE 80 in
May 1981, did not require withholding tax to be collected with
respect to the net loan interest remittances abroad of all public-
sector entities, including "federal, state, and municipal
autonomous governmental agencies". In January 1985, during the
phase III negotiations, the Brazilians, in resisting the efforts of
foreign lenders to have the Central Bank issue them DARF's and
ostensibly pay withholding tax on all its net loan interest
remittances abroad, advised the BAC that there was "no room for any
change * * * [in the Central Bank's] tax immunity."
In our opinion, the applicable Brazilian law with respect to
the Central Bank's restructuring debt interest remittances is as
reflected in SRF 36840 and in certain Brazilian Supreme Court
39(...continued)
Paragraph 1. The provisions of letter a of item
III above extends to the autonomous governmental
entities, as regards the assets, revenues, and services
connected with their essential purpose or resulting
therefrom * * *
40 On brief, petitioner asserts that, to the best of its
knowledge, "no banks lending to Brazil were aware of SRF 368
until March 18, 1994, when Respondent produced a copy in its
(continued...)
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