KRA alleges Sh280m tax evasion by Keroche in factory closure

Keroche Breweries has collected taxes amounting to Sh279.9 million but failed to remit the same to the State, Kenya Revenue Authority (KRA) has revealed.

In a rejoinder to complaints by Keroche Breweries Chief Executive Tabitha Karanja over closure of her Naivasha-based plant, KRA said it took the action after the company failed to send it the principal tax, even after the brewer itself admitted to having collected the money from January 2022 to date in its monthly self-assessment report.

The tax heads that Keroche is reported to have collected without remitting to KRA include excise duty, commonly known as the ‘sin tax’, and 16 per cent value added tax.

These taxes were paid by consumers through the sale of Keroche’s products, and were to be forwarded to KRA.

“It can only mean that the taxpayer (Keroche) may be using taxes collected to fund the company’s operations or for other private purposes,” said the taxman in a statement sent to newsrooms yesterday.

Keroche has since 2006 been embroiled in a tax dispute with KRA regarding some of its products, which has escalated to various avenues of dispute resolution including the Tax Appeals Tribunal, High Court and Court of Appeal.

On Friday last week, Ms Karanja requested President Uhuru Kenyatta to intervene following the closure of the Keroche plant, claiming that KRA had also sent an agency notice to a number of banks in a bid to recover the outstanding tax bill.

Ms Karanja, who started the company in 1997 with her husband Joseph Karanja, said the business has been going through some turbulent times, exacerbated by the Covid-19 pandemic.

She said she decided to directly petition the President after she failed to get KRA Commissioner General Githii Mburu, and warned that closure of the company would lead to massive job losses.

“This has drained all our resources. It is a bad position to be in,” said Ms Karanja.

According to KRA, Keroche had not only been failing to remit taxes to the State but had also refused to honour the payment plans agreed upon between them.

“By allowing any taxpayer to continue collecting taxes and not remitting the same, KRA will not be executing her mandate of ensuring that taxes that fall due are remitted in a timely manner and that all taxpayers remit their fair share of taxes ‘not a shilling more and not a shilling less'.”

The taxman said allowing a manufacturer to sell its products without levying correct taxes or to collect taxes without remitting amounted to granting those evading taxes undue advantage over the many law-abiding taxpayers who diligently pay their taxes.

“It is to introduce distortions in the market that will end up killing tax paying business at the expense of those that do not remit taxes," it said.

"In the end, no taxes will be paid and employment will be lost when the tax paying businesses close down due to unfair competition from those not paying taxes.”

In March 9, 2020 the Tax Appeals Tribunal made a ruling on the long-running tax dispute between Keroche and KRA, ordering the brewer to pay Sh9.1 billion in arrears.

The brewer had opposed the charging of excise duty on one of its products, Vienna Ice Brand of Vodka, which it argued had been produced by diluting Crescent Vodka, a process that the brewer insisted did not amount to manufacturing.

However, the tribunal held that Keroche was involved in the compounding of spirit, which amounts to manufacture.