Having been the biggest challenger to the mighty East Africa Breweries Ltd-EABL, Keroche breweries now faces a dark future over tax raws. The Kenya Revenue Authority-KRA has revealed through a Monday newspaper how the ailing Naivasha-based brewer owes it Ksh.22bn in unpaid taxes.
The details revealed from the report include unpaid excise duty, corporate tax, VAT and penalties of Sh3.02 bn, all spread to a 16-year battle between the taxman and Keroche.
The KRA was forced to respond to the entire stakeholders including the general public after Keroche’s CEO-Mrs Tabitha Karanja made a public outcry to the head of state for intervention. However, the move appeared to taint KRA as saboteurs of the locally grown factories, hence tainting the government negatively.
How much exactly is KRA chasing? Ksh22billion or Ksh351million ?
Keroche breweries link its woes to an Sh351 million demand, a narrative that taxman strongly rubbishes. According to the KRA, the brewer owes the State over Sh22 billion in unpaid taxes.
The KRA reveals it had an agreed plan with the brewer to clear the tax arrears, including a deal to pay half a billion shillings monthly from December to clear a Sh4.49bn debt. However, Keroche defaulted.
“Keroche has not honored the payment of installments as per the agreements,” said the KRA.
The Sh4.49 bn was part of a Sh7.54bn tax demand, which included Sh3 bn penalties. The company appealed to the government to write off Sh3.99bn on agreement it would pay the Sh4.49 billion. However, the treasury hasn’t responded back.
KRA’s Sh22.79 bn demand is nearly equivalent to the Sh24.9 billion that East Africa’s most profitable company- Safaricom paid the KRA. This is more than the combined worth of nearly half of the firms listed on the Nairobi Stock Exchanges (NSE).
Diageo’s EABL dominates the market with its beers ( Tusker and Guinness), as well as Johnnie Smirnoff vodka and Walker whisky. It knocked out London-based SABMiller in the Kenyan market during the beer wars of the late 1990s.
Keroche had hoped to munch into EABL’s market share through its Summit Malt and Summit Lager beers, hopes that have been thwarted by the KRA crackdown. At some point, Keroches’s entry into the market saw analysts term it as ‘Beer war’s II’.
Keroche’s production process had accrued Ksh7.54 bn in taxes. However, the company argued that Vienna Ice liquor’s production did not amount to manufacture since it’s processed by diluting Crescent Vodka.
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Keroche said that it only dealt in fortified wine products which attract excise duty at a rate of 40 percent.
The KRA relied on the Compounding of Denatured Spirits Act Cap 123, arguing that the process undertaken by the brewer amounted to the manufacture of a new product. It further maintained the brewer has to pay higher rate excise taxes at 60 percent since its products don’t lie in the lower rate category.
A KSh7.54 bn out-of-court settlement deal was reached. A KSh351 million tax was collected by Keroche from its clients and failed to remit to KRA.
“This means that Keroche has been collecting excise duty tax and VAT from its consumers through the sale of its products but has not been remitting the taxes to KRA,” said the KRA.
The founders of Keroche are also fighting tax evasion suit amounting to KSh14.4 bn, complicating further their survival quest. In August 2019, they were arrested for tax evasion crimes in their firm since 2015.
Keroche is owned and run by the Karanja family-Mrs. Karanja and her husband Joseph Karanja.