Toyota Thailand Suspends Prius Output in Tax Tiff

Toyota Thailand is halting production of the Prius for up to a year in a multimillion-dollar tax dispute with the Thai government.

The English-language Bangkok Post quotes an unnamed source as saying Prius production at Toyota’s Chachoengsao factory will be suspended until the Central Tax Court hands down a final verdict on the tax case.

The newspaper says the Thai government claims there is no actual production line for the Prius at the Chachoengsao factory and alleges Toyota understated taxes by claiming the hybrid car is a completely knocked-down vehicle, even though the automaker imports most of the main finished parts from Japan for local assembly.

The investigation came after the Nation Associate Anti-Corruption Network earlier this year asked the Finance Ministry to investigate whether the hybrid is a CKD vehicle totally assembled in Thailand, or is an imported car subject to a 187.8% tax.

The newspaper says Toyota insists all Prius parts are imported under the Japan-Thailand Economic Partnership Agreement, under which the parts at issue are subject to import duty of zero to 10% compared with zero to 80% for normal imports.

Toyota Thailand “reaffirms the company imports Prius parts using the correct declaration approved by the relevant government agencies,” the source says.

Thai authorities, however, ordered Toyota to pay TB11 billion ($309 million) in additional tariffs and taxes, applying a higher rate equal to that imposed on finished vehicles. The automaker then filed suit appealing the Customs Department ruling.

Toyota began producing the Prius in Thailand in November 2010. As of last year, 18,000 of the hybrid cars had been sold in Thailand, but the slumping economy dried up deliveries to less than 300 units in first-half 2015.

Prius prices start at about TB1.2 million ($33,679) and locals consider it a luxury vehicle.