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loaned Bong for its expansion programme, $ 25 million, was also
exempted from withholding taxes. A two years' exemption was
granted on December 26, 1975 by the then Minister of Finance and
Steve Tolbert's successor at the Ministry of Finance, Edwin
Williams. In 1977 Finsider claimed continued exemption from
withholding taxes on the interest payments on this | 25 million
loan, basing its claim on the exemption granted the Kreditanstalt
fur Wiederaufbau (94). Though the Italian company's position was
far from strong in this respect the dispute was not yet solved
on December 31, 1977 when the two-year exemption period expired.
As a result of B.M.C's borrowing practices the company's debtequity
ratio was 4-9 : 1 as of December 31, 1976. The original
Concession Agreement did not include a maximum debt-equity ratio.
However, the revised Concession Agreement of 1974 stated that
interest and financing charges on loans contracted between
August 1973 and December 31, 1980 could only be charged against
Profits if the debt-equity ratio did not exceed 3 : 1• The
provision, however, had been waived in the case of interest and
financing charges on
"any long-term indebtedness incurred in connection with
special circumstances on any major expansions, or investments
related to an improvement of the productivity, provided
the Concessionaire.shall first have obtained the
approval of the Government" (95).
It is not certain that the Government has officially given its
approval in this respect though the Government's representatives
on B.M.C.'s Board of Directors (one of the results of the 1974
Revision) appear to have given their approval to these
borrowings. However, the explicit mentioning of the long-term
character of these loans in the case of a waiver may entitle
the Government to restrict a waiver precisely to those loans
which deserve such a qualification and are neither medium-term
nor short-term borrowings.
The 1976 debt-equity ration of nearly 5 : 1 constituted an increased
dependency on borrowed funds when compared to the 1965
situation. After the completion of the initial investments in
1965 (which had been financed with loans of over $ 66 million)
the debt-equity ration had been 4 '• 1 • In the second half of the
1960's stockholders' loans had represented approximately 25? of
all borrowed funds at a cost to the Liberian Treasury of some
$ 1.8 million in the 1965-1969 period only (96). This excessive
use of'"disguised equity capital" had led to an agreement between
the Government and the private shareholders in 1972 (when the
debt-equity ratio had risen to 6.17 : 1) according to which part
of these stockholders' loans, amounting to | 4 million, would be
treated as non-interest bearing loans for a period of eight
years commencing January 1, 1973. In connection with the
expansion programme of the 1970's it was later agreed that a
further $ 10 million of shareholders' loans would be treated as
non-interest bearing as from July 1, 1977 (97).
Bong's debt-equity ratio had also been involved in the