The_Open_Door_deel1

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these funds to B.M.C. in the form of a loan. The interest rate is
10.85? (which probably is less than the percentage Finsider pays
to the E.E.C.) and the loan is due for repayment by January 1985,
This loan is also in U.S. dollars (91).
The borrowing practices of the investors in combination with the
use of a currency - the U.S. dollar - which showed fundamental
weaknesses during the past decade has constituted further losses
for the Liberian Treasury. As most of the loans with respect to
the Bong Project had been made in Deutsch Mark and Swiss francs
whereas repayments had to be made from dollar funds the mining
company incurred exchange losses which totalled $ 40 million in
the years 1969 (when the first major DM/US $ fluctuation
occurred) through 1976. Of this amount $ 21.4 million had been
charged to income as of December 31, 1976 resulting in a loss
for the Liberian Treasury amounting to $ 10.7 million.
The conversion of two loans in December 19 72 which Finsider had
granted B.M.C in March 1966 and November 1972, totalling $ 5-2
million, into a loan of DM 16.8 million (at the rate of exchange
then prevailing) while simultaneously (slightly) lowering the
interest rate - a decision taken without consulting the Government
of Liberia - cost the Government almost $ 1 million (up to
December 1976) as B.M.C. suffered larger exchange losses after
this conversion. As the then Minister of Finance and member of
the Board of Directors, Stephen Tolbert, at the May 1973 Board
meeting objected to this conversion because of its consequences
for the Government and consequently abstained from voting on the
resolution approving the 1972 financial statements the Liberian
Government may well be able to contest the validity of the company's
decision and refuse to bear the financial consequences
of this conversion (92). The 1958 Concession Agreement had also
exempted interest payments on stockholders' loans from taxes -
which constituted another loss for the Liberian Treasury. In
the beginning of the 1970's this situation was changed.
In 1971 a Tax Treaty between Liberia and the Federal Republic
of Germany was concluded, retroactively effective as of 1970.
On November 15, 1971 the Government and the German owners of
B.M.C signed an agreement which introduced a non-resident withholding
tax, to be paid on the interest income on stockholders'
loans - though at a reduced rate of 8.5? instead of the regular
1 5? - and retroactively applicable to interest paid by B.M.C.
on or after July 1, 1970. This increased Government's revenue
from the mining venture by over $ 1 million in the 1970 - 1977
period. The Italian participants in B.M.C also agreed to pay
withholding taxes on interest income from stockholders' loans
as of January 1, 1975 by the Supplemental Concession Agreement
of December 16, 1974 (see below).
However, the interest paid on the $ 12 million loan provided by
Finsider through the E.E.C. will not be subject to withholding
tax under this Supplemental Concession Agreement, the 1974
Agreement, which exempts loans granted by
"any creditor of the Concessionaire which is a governmental
or internatiojtal lending institution" from tax (93).
Interest payments on the balance of the funds which Finsider