(a) Balance sheet and income statement

	2005	2004
In current assets (i)
Deferred income tax	7,889	5,625
Deferred social contribution	15,626	24,590
	23,515	30,215
In long-term assets (ii)
Deferred income tax	218,288	172,653
Deferred social contribution	80,532	84,618
	298,820	257,271
In current liabilities (iii)
Deferred PASEP	21,827	22,217
Deferred COFINS	49,066	49,685
	70,893	71,902
In long-term liabilities (iv)
Deferred income tax	62,162	69,731
Deferred social contribution	17,869	20,593
Deferred PASEP	14,980	12,539
Deferred COFINS	38,432	27,192
	133,443	130,055
Income For the year
Income tax	(271,387)	(198,030)
Deferred income tax	43,242	22,792
	(228,145)	(175,238)
For the year
Social contribution	(72,039)	(52,579)
Deferred social contribution	(16,195)	(14,020)
	(88,234)	(66,599)

(i) In Current Assets

Mainly calculated on temporary differences in the amount of R$ 31,557 (2004 – R$ 22,501). The tax loss carryforwards basis of social contribution accumulated in December 31, 2005 was R$ 142,061 (2004 – R$ 250,719) wich will be realized until December 31, 2006.


(ii) In Long-Term Assets

Mainly calculated on temporary differences in the amount of R$ 873,152 (2004 – R$ 690,613) related to income tax and R$ 894,795 (2004 – R$ 705,969) related to social contribution.

The loss carry forward basis of social contribution has been transferred to short-term in 2005, at December 31, 2004 the balance was R$ 234,231.


(iii) In current liabilities

Substantially calculated on amounts invoiced to government agencies, with taxes being deducted upon receipt of the invoices.


(iv) In long-term liabilities

- Income tax and social contribution

Substantially calculated based on temporary differences in the amount of R$ 248,651 (2004 - R$ 278,923) relating to income tax and R$ 198,545 (2004 - R$ 228,817) relating to social contribution.

- PASEP and COFINS

Substantially calculated on amounts invoiced to government agencies, the tax assessment being made at the time of acknowledgment of the invoices.


(b) Composition of deferred taxes and social contributions

	2005	2004
In current assets:
Provision for contingencies	10,730	7,650
Tax loss carryforwards	12,785	22,565
	23,515	30,215
In long-term assets:
Provision for contingencies	288,898	228,929
Tax loss carryforwards	-	21,081
Other	9,922	7,261
	298,820	257,271
Total deferred assets	322,335	287,486
In current liabilities:
Deferred PASEP	21,827	22,217
Deferred COFINS	49,066	49,685
	70,893	71,902
In long-term liabilities:
Profit for government agencies	80,031	90,324
Revenue for government agencies	53,412	39,731
	133,443	130,055
Total deferred tax liabilities	204,336	201,957

(c) Reconciliation of the effective tax rate

The amount recorded as income tax and social contribution expenses in the financial statements is reconciled from the nominal rates provided by law, as shown below:

	2005	2004
Income before taxes on income	1,217,148	789,987
Statutory rate	34%	34%
Tax expense at statutory rate	(413,830)	(268,596)
Permanent differences
Realization of revaluation reserve	(30,413)	(35,530)
Interest on shareholders’ equity	118,393	51,998
Other differences	9,471	10,291
Income and social contribution taxes	(316,379)	(241,837)
Current	(343,426)	(250,609)
Deferred	27,047	8,772
Effective rate	26%	31%