Taxman returns to court over Sh22m tax battle with Keroche

A plant operator at Naivasha-based Keroche Breweries. [Antony Gitonga, Standard]

Keroche Breweries is at risk of being closed again after the taxman moved to court claiming that the brewer had failed to comply with a court order to pay tax arrears.

The Kenya Revenue Authority (KRA) filed a certificate of urgency before Justice Alfred Mabeya of the High Court's Commercial and Tax Division after the Naivasha-based brewer allegedly reneged on a payment agreement over a Sh14 billion tax dispute.

KRA argues in its application that even after it opened the plant, Keroche Breweries, whose chief executive Tabitha Karanja, who was recently elected Nakuru Senator, refused to pay taxes ordered by the court.

"That following the unsealing of the packaging line, the stores and the reactivation of the Excise Goods Management System (EGMS) and allowing Keroche Breweries Ltd to carry on business on July 29, 2022, the respondent and the contemnors have declined to make good the payments as directed by the court or any taxes for that reason as the applicant cannot undertake any enforcement action under the tax law as the same will breach the same order of the court," reads part of KRA's filing dated August 31, 2022.

KRA argues that Keroche has not only refused to pay the tax arrears, but it also continues to collect taxes from consumers on behalf of KRA without remitting the same to the taxman.

The tax agency says it has written to Keroche four times demanding payment, but the brewer has refused to comply.

"That the respondent/applicant (KRA) is apprehensive that if this application is not heard on a priority basis, the respondent will continue to deliberately ignore and/or neglect the orders of the court, jeopardising the mandate of the respondent (KRA) and frustrate its efforts of collecting taxes when they become due and payable," said KRA.

Keroche, KRA says, owes a total of Sh22.3 million, of which Sh14.3 million is current plus an instalment of Sh8 million that was to be paid seven days after the reopening of the plant.

Catch-22 situation

It is a catch-22 situation for the taxman as it fears that if the court does not compel Keroche to pay the arrears, it will result in revenue losses while closing the plant again would see it fall afoul of earlier court orders and could be held in contempt.

On July 14, Justice Mabeya directed the beer maker to pay Sh8 million tax to KRA within seven days as the first instalment of tax arrears and continue to do so on the 30th of every month until September as a condition for the taxman to open its plant in Naivasha.

"An order be and is hereby issued that the defendant/respondent (KRA), its agents, officers, associates to unseal the packaging line, the stores and to reactivate the excisable goods management system in the applicant's Keroche Breweries processing plant in Naivasha and to allow the applicant to carry on with business forthwith," ruled the judge.

As a result, KRA opened the plant on July 29, allowing Keroche to carry on with its business. Keroche's tax wars with the KRA have been in the corridors of justice for years.

KRA has used criminal and civil law against the Naivasha-based brewer in pursuit of taxes.

After pressing charges against Keroche's top directors Ms Karanja and her husband Paul Karanja on a claim of Sh14 billion, KRA had another fight before the tax tribunal.

The brewer's woes began in 1997 when Keroche introduced Viena Fortified wine, which was duly given a stamp of quality and authority by the Kenya Bureau of Standards.

Immediately, KRA came calling with a Tariff HS Code 22.04 or 45 per cent of ex-factory value as the excise duty.