Toyota warns about impacts of Thailand tax reform

Thailand may benefit from a Toyota relocation from Japan to Korea. However, Toyota warned that the Thai government must be careful not to make any dramatic change to policy guidelines that would hurt the local automotive industry, especially tax restructuring that might push up car production costs.
Toyota expressed concern after hearing reports that Thailand’s Revenue Department were working on a new automobile excise tax structure

Keywords: Tax, Toyota, Tax reform, Thailand

Toyota Motor Thailand, the country's biggest carmaker, is ready to respond to its parent company's plans to move the automobile production base from Japan to avoid the impact of the strong yen, said president Kyoichi Tanada.

But he warned that in order for Thailand to benefit from the relocation, the Thai government must be careful not to make any dramatic change to policy guidelines that would hurt the local automotive industry, especially tax restructuring that might push up car production costs.

"We are ready to comply with the [Thai government's] decision but we are concerned that the changes may affect the industry which is performing well at the moment," said Mr Tanada.

Any tax change that will increase the car production costs would downsize the automobile market and diminish the car exports as a result.

His comment came after reports that the authorities were working on the new automobile excise tax structure with the focus on high fuel efficiency, lower carbon dioxide emissions and safety aspects of the vehicles. Currently, the excise tax rates are based on the engine sizes and favour vehicles compatible with alternative fuels such as biofuels and hybrid vehicles.

The outcry of certain car companies about the preferable tax rates on alternative-fuel models at the expense of other environmentally-sound technologies has led to the tax reform.

Thailand may therefore miss out on the opportunities stemming from Toyota Motor's decision this week to move its production sites from Japan if the costs of car production in the country are higher as a result of the tax reform.

"If Toyota could not make the cars profitably in Thailand, it may shift the production to Indonesia," said Mr.Tanada.

He added that the automobile exports from Thailand have already suffered from the strong baht in recent years but the local market growth could help offset the losses.

Toyota Motor president Akio Toyoda said in his New Year's address at the company's website that the company was considering moving its production sites overseas if the yen remained high and put pressure on its profits.

Other automakers, Nissan Motor Co has already moved its production of the March compact cars from Japan to Thailand, and Ford Motor Co has announced it would build its Focus model at its new $450-million factory in Thailand by 2012 to combat the surging manufacturing costs in other regions.

Earlier, Toyota announced plans to invest eight billion baht to expand its Ban Pho factory in Chachoengsao to 220,000 units per year from the existing 140,000 units to meet the rising demand for Hilux Vigo pickup trucks and Fortuner pickup passenger vehicles at home and abroad. \The planned investment will also go toward expanding the plant that makes diesel engines for both models. The expansion will come onstream by September this year.

Senior vice-president Wichien Emprasertsuk said the well-developed infrastructure and a strong supplier network are among Thailand's advantages over other countries in the region but the strong baht and rising labour cost in Thailand are threatening the growth of the automotive industry.

Indonesia is attractive due to its relatively lower labour cost, population size and the steady growth, he said.

Source: Bangkok Post, 21 January 2011

Full article: www.bangkokpost.com

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