What’s new in business news: August 26, 2015

Toyota Prius to stop production until legal case resolved, over 1.2 billion paid to Wat Phra Dhammakaya but Phra Dhammachayo still denies involvement & low-income earners focus of economic stimulus package but no cash giveaways this time.

Authorities allege Toyota understated taxes by falsely claiming the Prius is a completely knocked-down vehicle. They also claim there is no actual production line for the Prius at the Chachoengsao factory.  Photo courtesy of Toyota Motor Corporation.

AUTOMOTIVE SECTOR

Toyota Prius to stop production until legal case resolved

Toyota Motor Thailand Co (TMT) will suspend production of the Prius autmobiles at their Chachoengsao factory for about a year or until the Central Tax Court hands down a final verdict on a tax dispute. Thai authorities claim there is no actual production line for the Prius at Toyota’s Chachoengsao factory. Thailand is currently Toyota’s largest Southeast Asian production base. Toyota began producing the Prius in Thailand in November 2010.

Thai authorities allege Toyota understated taxes by claiming the hybrid car is a completely knocked-down (CKD) vehicle despite the fact that the company imports most of the main finished parts from Japan for local assembly. The Nation Associate Anti-Corruption Network (NACN) early this year asked the Finance Ministry to investigate whether the hybrid is a CKD vehicle — totally assembled in Thailand — or an imported car, as the latter is subject to a 187.75% tax. The authorities then ordered Toyota to pay 11 billion baht in additional tariffs and taxes, applying a higher rate equal to that imposed on finished vehicles.

Toyota filed a lawsuit in June against the Customs Department, while last month it announced it would sue the NACN for damaging its reputation. A Toyota source insists all Prius parts are imported under the Japan-Thailand Economic Partnership Agreement (JTEPA), under which these parts are subject to import duty of zero to 10% compared with zero to 80% for normal imports. Toyota has reaffirmed that it imports Prius parts using the correct declaration approved by the relevant government agencies.

TMT President Kyoichi Tanada last month said TMT faced a spate of negative factors that had engulfed Thailand’s automobile market, particularly weak consumption and high household debt. The private sector has also become wary of spending and new investment. The slow economy and risks to the company have prompted it to cut its domestic sales target to 280,000 vehicles this year from an earlier projection of 330,000, marking a third consecutive year of decline.

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BANKING SECTOR

Over 1.2 billion baht paid to Wat Dhammakaya but Phra Dhammachayo still denies involvement Over 1.2 billion baht was paid to the Dhammakaya temple by the failed Klongchan Credit Union Cooperative (KCUC), when the new 600 million baht that investigators have traced recently is added.

The famous abbot who leads Dhammakaya, Phra Dhammachayo, denies any involvement in the scam, even though an investigation has found that eight cheques valued at 431 million baht were donated to him personally.

Investigators found seven more credit union employees, who mostly used to work in financial and credit positions, were connected to the embezzlement scandal. When their homes were raided, police found documents related to the scam and copies of cheques made out to Wat Phra Dhammakaya’s abbot. Next week, the Department of Special Investigation (DSI) said up to 13 former employees accused of being linked to the scam will face criminal charges that they colluded to siphon money from the cooperative’s accounts.

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GOVERNMENT ECONOMIC POLICY

Economic stimulus focuses on low-income earners but no cash giveaways this time

Cheap loans by state-run banks to low-income earners are at the heart of new short-term stimulus measures aimed at countering slowing growth and revitalising the economy. Cutting interest rates for the 40 billion baht in loans to Village Funds to 3% from 5% is under consideration. Accelerating public investment in small projects such as irrigation and road construction will be included, but cash giveaways would not be included.

State-run banks would be instructed to lend low-interest loans to grass-roots people (poor people) nationwide to boost their financial liquidity and create jobs, as such citizens are in a cash squeeze and cannot access formal financial sources.

Domestic investment is a crucial engine for pushing the country’s economic growth amid export contraction. The cooling economy in China and unexpected factors such as last week’s bomb attack in Bangkok and the severity of the drought have added pressure to Thai economy. Concern is growing that the 2015 economic growth target of 3% may not be achievable.

The leftover central government budget and undisbursed investment budget for the fiscal year 2015, amounting to a combined 7.91 billion baht, will be used to finance the new measures. The National Legislative Assembly (NLA) has passed a proposal that would transfer the investment money that was not used last year back to the central budget to be used again. State agencies that failed to use up their budget in the past have usually asked the Finance Ministry to carry over the funds to the next fiscal year.