Cablegate: Brazil: Btt-Receita Federal Lina Vieira and Ambassador

DE RUEHBR #1217 2561125
R 121125Z SEP 08



E.O. 12958:N/A
SUBJECT: BRAZIL: BTT-Receita Federal Lina Vieira and Ambassador

1. (SBU) SUMMARY: In a meeting with the new head of Receita
Federal, Lina Vieira and the chief international tax negotiator
Marcus Pontes, Vieira appeared focused, well-briefed and clearly
knowledgeable both on general tax issues and very aware of domestic
political atmospherics. She understood some English, but spoke only
Portuguese. While appearing generally supportive of Bilateral Tax
Treaty discussions with the United States, political difficulties in
securing passage in the Brazilian congress of the Brazil-US Tax
Information Exchange Agreement (TIEA), delays in GOB receiving a
letter from Brazilian CEO Forum members affirming desire for a BTT,
and internal reorganizational issues appear to be slowing progress
toward a further round of negotiations. END SUMMARY

2. (SBU) Information proposal from Treasury: While initially
characterizing this proposal as still under review by Receita
Federal lawyers, during the course of the meeting Pontes
acknowledged, "We are comfortable with the language Treasury
proposed, but we can not respond with a greenlight while the TIEA is
in such political trouble." Pontes added Receita is comfortable
informally letting Treasury know the language is basically
acceptable, but that the agency will not respond formally or in
writing at this point. Vieira underlined, "we love it (the TIEA and
information exchange under a BTT) because we get more from the
United States than we are asked to give."

3. (SBU) September discussion dates response: Pontes said, with
Vieira's agreement, that Receita Federal absolutely needed to have
in hand the letter from the Brazilian CEO Forum members explaining
why they want a BTT before Receita Federal, politically, could move
to schedule a date for the next negotiating round. He noted Receita
Federal had both the letter from the American CEO Forum
representatives and from the National Foreign Trade Council to
Treasury. Pontes said, again with Vieira agreeing, that Receita
Federal can not, due to political optics, proceed with two letters
from American business to USG wanting a BTT and nothing from
Brazilian business to GOB. The Ambassador urged Receita to at least
"pencil in" a date before getting this letter. He did not receive a
commitment, but Vieira again emphasized information exchange, "is
very valuable to us, I want to reinforce this point." Marcus added
that the CEO Forum support noted in an August 15 Valor article was
helpful, but Receita needs the letter addressed to the government
outlining why Brazilian CEOs want a BTT. (NOTE: The letter signed
by Brazilian CEO Forum chair Josue Gomes da Silva and dated August
29, was transmitted to Receita Federal on September 1. We
understand Receita offered September 30-October 2 for the next round
of discussions with Treasury).

4. (SBU) Op-Ed: Lina and Marcus enthusiastically welcomed the
Ambassador's offer to do an op-ed under his name clarifying the USG
position on the TIEA. Receita Federal reacted much more lukewarmly
to an inquiry whether the mission reaching out directly to the
Chamber's Constitutional committee would be helpful.

5. (SBU) Delaware: Receita Federal explained that law 11.727 will
withdraw Implementing regulation 188 which lists tax haven countries
and regions. Receita Federal must publish a new list to implement
law 11.727. Pontes confirmed that Delaware is one of the regions
under consideration as Receita decides on its new tax haven list.
Pontes noted that Receita Federal is worried about Brazilian
companies that are "mis-using" Delaware and wants to address that
perceived problem. No decisions on countries/regions to be
identified as tax havens have been made.

6. (SBU) Comment: On August 28, Receita Federal asked to cancel the
TDA-funded Global Customs Initiative workshop and reschedule for
October. Receita Federal told post that Lina Vieira is required to
concentrate on fully accessing/evaluating each regional operation of
Receita Federal and will be travelling heavily this month while
simultaneously learning the depth of the portfolio she assumed on
July 31. Separately, Receita Federal informed FINATT that Receita
Federal has been tasked by the Finance Ministry to develop a
structural reform proposal for re-organizing the Agency, which has
thrown the Secretary and her staff into overdrive. In sum, we are
receiving strong signals that Receita Federal is devoting itself as
its first priority to its own internal organization, structure, and
way forward. This could impact Receita Federal's ability and
readiness to engage with USG in the short-term on our various areas
of cooperation with this agency. END COMMENT.

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