11 July 2024

This has been a bad year for Toyota Motor Thailand Co Ltd (TMT), the local subsidiary of the Japanese automaker.

In mid-September, the company lost a drawn-out court battle and was ordered to pay 11.6 billion baht in unpaid taxes over its importation of components for local production of its Prius hybrid model for the last decade.

Meanwhile, a bribery scandal related to the case refuses to go away. Separate official investigations in Thailand and the United States are ongoing more than a year after parent company Toyota Motor Corporation (TMC) revealed in March 2021 that the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) were investigating “possible anti-bribery” violations in TMC’s Thai subsidiary, TMT.

TMC said in a regulatory filing that the DOJ and SEC investigations “could result in the imposition of civil or criminal penalties, fines or other sanctions, or litigation” by either of the agencies.

Legal battles in three courts

Between 2010 and 2012, TMT imported car parts for the production of approximately 20,000 Prius sedans in Thailand. The company declared the imports were added to domestic components and therefore eligible for import tax reduction or exemption under the Japan-Thailand Economic Partnership Agreement (JTEPA).

However, the Customs Department ruled that Prius cars assembled in Thailand used entirely imported parts, with no domestic components at all. The imports were therefore subject to 80 per cent duties, instead of the 10-30 per cent as claimed by the company.

According to the agency, TMT owed the Thai government 11.6 billion baht in backdated taxes — 7.6 billion in import tariffs and fines, 2 billion in excise tax, 202 million in interior tax, and 1.82 billion in value-added tax.

In June 2015, TMT took the dispute to the Central Tax Court, which ruled in favor of the automaker. However, the Customs and Revenue departments later appealed and won the case. The Court of Appeals ruled in 2019 that TMT’s imports of Prius parts were subject to 80-per-cent import duty.

TMT appealed again, arguing that JTEPA rules allowed a lower tax rate for imported Prius parts.

On September 15, the Supreme Court’s Tax Litigation Division upheld the Court of Appeals verdict and ordered TMT to pay 11.6 billion baht in unpaid taxes. The court ruled that the company had imported all parts and reassembled them into complete Prius cars, so was not eligible for reduction of customs tax and import tariffs under the JTEPA.

In a statement, Toyota’s Thailand unit stood by its interpretation of the Thai-Japanese agreement but said it would comply with the court verdict.

Bribery claims investigated

While the lengthy legal battle is over, the bribery scandal is still far from resolved.

US-based legal news website Law360 quoted a Thai judge in the Supreme Court President’s Office as saying that Thailand’s judiciary is still investigating claims that TMC suspected that TMT’s legal consultants may have bribed Supreme Court judges to overturn a judgment in a bid to erase the 11.6-billion-baht tax debt.

Meanwhile, the House committee on prevention and suppression of corruption and misconduct, led by Sereepisuth Temeeyaves, has launched its own probe into the bribery allegations, summoning witnesses including a senior Toyota executive to testify.

Law360 quoted the judge as saying that both matters are “active” but “confidential”, refusing to elaborate further.

In June last year, MP Rangsiman Rome from the opposition Move Forward Party asked the Sereepisuth panel to investigate claims linking the bribery scandal to two former Supreme Court presidents and a former Appeals Court president.

The trio were identified by Law360, which reported in May 2021 that US authorities were investigating whether Toyota had violated the Foreign Corrupt Practices Act (FCPA) as they sought proof that the carmaker had bribed top Thai judges. The law prohibits US citizens and entities from bribing foreign government officials to benefit their business interests.

In the US, a federal investigation is also ongoing, according to Toyota’s filings with the US SEC.

US experts expect the ongoing FCPA investigation against Toyota to “continue for another year or more” due to multiple factors, including the complexity of the case and the COVID-19 pandemic, Law360 reported in June.

By Thai PBS World’s Business Desk