Toyota faces Thai bribery probe over tax dispute

Toyota is under investigation in Thailand over allegations consultants hired by the world’s largest carmaker tried to bribe local officials over a tax dispute, according to Thai authorities, court documents and a person with knowledge of the matter.

The probe follows a filing last month in which Toyota revealed that it had reported “possible anti-bribery violations” related to its Thai subsidiary to the US Department of Justice and the Securities Exchange Commission.

Toyota is one of the biggest foreign investors in Thailand, where it makes a large range of cars, vans, and pick-up trucks for the local market and for export. The country is Toyota’s biggest manufacturing hub in south-east Asia. Prior to the Covid-19 pandemic, car sales had been strong in a market where it has a 31 per cent share.

Earlier this month, Thailand’s Court of Justice said in a statement that it would take action against any of its judges found to have taken bribes. The statement, which the court described as a move to “clarify facts” in a news report on a foreign website, directly referenced a tax dispute involving Toyota.

“If the Court of Justice has received information or explicitly found that any judge committed an act of corruption to their duty, whether it is about bribery or not, the Court of Justice will resolutely investigate and punish any action which dishonours judges, undermines the neutrality of the court, or causes society [to] lose faith in the Thai justice system,” it said.

According to the court of justice, the case involves a tax dispute worth Bt10bn ($319m) between Toyota Motor Thailand and tax authorities over imports of parts for its Prius hybrid model. 

The affair dates back to 2015 when Toyota’s Thai subsidiary was accused by local customs authorities of understating taxes by claiming that the imported Prius vehicles were assembled from completely knocked down kits (CKDs), or from imported parts that were later assembled in Thailand.

CKDs would have been subject to a discounted tax rate under a Japanese-Thai free trade agreement, but if the cars were fully assembled before being imported they would have attracted a much higher rate. 

Toyota appealed against a decision by customs authorities to impose a higher duty in 2015, but lost. 

Thailand’s Court of Justice has said that it had accepted a petition to review the case, but had not yet begun hearing it.

In its regulatory filing last month, Toyota warned that the US investigations regarding its Thai subsidiary could result in civil or criminal penalties, but the company has not disclosed any detail on the allegations.

In a statement, Toyota said it is co-operating with the investigations and declined to comment on the tax dispute in Thailand. “We take any allegations of wrongdoing seriously and are committed to ensuring that our business practices comply with all applicable government regulations,” it said.

The SEC and the DOJ declined to comment.