Industrial Molinera C. A. is immersed in assessment processes ordered by the Internal Revenue Service for 2004 and 2005. In an arbitrary and illegal manner, the Internal Revenue Service has closed down our premises based on the 7th General Provision of Law 99-24, which does not apply in this case, given that the situation is not within any legal framework as there is an ongoing assessment process in which the provision of Article 23 of the Internal Revenue Tax Law should be applied, which demands Presumptive Assessment in case the contributor does not deliver the accounting information requested by the Internal Revenue Service.

Because of the above, the Industrial Molinera C. A., in accordance with the law for 2004 and 2005, chose to submit itself to a Presumptive Assessment procedure duly established by Internal Revenue law.

Faced with an arbitrary foreclosure decreed by the Internal Revenue
Service on March 3, 2008, the company filed a claim before Guayaquil Fiscal District Tribunal No. 2, challenging the foreclosure resolution because, according to the law, this sanction does not exist in these cases. This claim, according to the law, effects the immediate suspension of the execution of the foreclosure until said Tribunal concludes what is relevant, being that, in conformity with the Tax Code, all objections to a Tax Administration Resolution carries such effects and, indeed so much so, that the Tax Equity Law includes the duty to guarantee these objections.

In spite of the above cited, the Internal Revenue Service broke the law and, in an arbitrary fashion, has maintained the foreclosure of Industrial Molinera C.A. until the March 10, 2008, even though we had complied with the law.

These facts and actions clearly demonstrate the persecution exercised against our company in order to harm us, inasmuch as the IRS does not hold to the express legal provisions in exercising its capacities for assessment and sanctions.

We hope the IRS will not continue committing these illegal acts and that it will proceed according to the law in future.

In the audit process ordered by the IRS, the corresponding glosses should be issued, presumptively in this case, rather than proceeding with the application of illegal measures such as the foreclosure exercised against my client. So it is mandated by law and we comply with laws of Ecuador.

Sincerely,
Gustavo Negrete Ugalde
General Manager