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withholding tax on behalf of the borrowers-to-be, and we believe
it receives the pecuniary benefit on behalf of the borrowers-to-
be. Otherwise, if the receipt of the pecuniary benefit is
separated from the payment of tax, and the Central Bank is
entitled to receive the pecuniary benefit from the Brazilian
Government on behalf of the Brazilian Government, the Central
Bank could return it to the Brazilian Government. Thus, under
the rationale of the Finance Minister’s ruling, the payment of
the pecuniary benefit would be “a simple accounting transaction”
and “could be waived.”
Having concluded that the Central Bank did not receive the
pecuniary benefit as an agent of the Brazilian Government, but
rather on behalf of the borrowers-to-be, a finding of a subsidy
would not mean that the Brazil was subsidizing itself. Under the
facts of this case, we believe that it is proper to treat the
Central Bank as separate from the Brazilian Government and
therefore as “another person” for purposes of determining the
existence of a subsidy.
Since the Central Bank was acting on behalf of the
borrowers-to-be, rather than the Brazilian Government, the
instant case is closer to Example (1), than to Example (3), of
section 1.901-2(f)(2)(ii), Income Tax Regs. Both the payment of
the withholding tax and the Central Bank’s receipt of the subsidy
were inextricably linked to the transaction between petitioner
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