Toyota flags some big speed bumps

Toyota recently created a huge flutter by announcing it was being choked with excessive taxes, and that going forward, it might stop expansion and further investments in the country. Speaking to another media platform, Shekar Viswanathan, vice chairman of the local Toyota Kirloskar Motor, said: “The message we are getting, after we have come here and invested money, is that we don’t want you.” The auto sector is taxed at 28%, and with other add-ons for big cars, a Toyota SUV may carry an unbearable 50% tax load for the consumer. Viswanathan’s case is that such “punitive” taxes leave investors with thin margins and discourages launch of new products. 

Expectedly, there was a PR pushback from the government, and Toyota revised its statement to read it was in fact committed to India, and that it will be investing Rs 2,000 crore on electric vehicles (EVs). By then the damage had been done. The auto sector is not the only one complaining. Vodafone has been voicing its angst for quite some time.

Former Vodafone India chief Martin Pieters said last November: “For most foreign investors, it has been like a bad dream. ... The Indian telecom market has developed in a very negative way.” General Motors quit the country in 2017, while last year Ford Motor Co, after struggling for years, decided to exit after merging its assets with Mahindra & Mahindra. 

High taxes give immediate returns to the government but the long-term effect on growth is crippling. Over-taxed goods are expensive and kill demand and consumption. With slow sales, companies shy away from expansion, hitting both jobs and purchasing power. Toyota’s two units in Bidadi, Bengaluru, are designed to produce 3.10 lakh units a year; but the company sold barely 1.25 lakh cars last year.

A tax regime that changes its goalposts every two years, and inflicts retrospective and double taxation will not help the government’s ‘Make in India’ drive. Besides, permissions and compliance are a nightmare. If the government hopes  to pull us out of the sub-zero slowdown, it should give some weight to the words of Toyota’s Viswanathan.