The Kenya Revenue Authority (KRA) has vowed not to reopen Keroche Breweries, accusing the brewer of disregarding a deal to stagger payment of a disputed Sh22.79 billion tax bill and failing to pay duty after the taxman lifted the blockade on the plant in March.
The tough stance against the troubled Naivasha-based-brewer has dimmed an appeal from the firm for a six-month moratorium before beginning to make monthly repayments as per the agreement signed three months ago.
Deputy President William Ruto and his top rival and opposition veteran Raila Odinga in a rare common stand petitioned KRA to reopen the brewer, which the taxman shut on May 15.
Owned by the Karanja family, Keroche previously linked its woes to a Sh351 million demand, but KRA painted the brewer a cheat who owes the State over Sh22 billion in unpaid taxes.
Speaking to the Business Daily in an interview, KRA Commissioner General Githii Mburu said Keroche has breached terms of tax arrears payments and failed to pay a cent in duty from beer sales since its March reopening.
He added that Keroche was aware that the March agreement allowed the taxman to take enforcement action following a breach in payment terms.
“We also agreed they will remain up to date on current taxes so that when they sell, they will be remitting the dues. When they paid the initial payment and we reopened their facility, we waited for them to honour the payments but that did not happen,” said Mr Mburu.
“The taxpayer did not honour the payment plan agreed upon for the third time…to allow a tax-evading business to continue operating despite it dishonouring all payment plans is to promote a culture of impunity, promote unfairness and allow a few to use public funds to enrich themselves.”
The Sh22.79 billion tax demand is worth more than the market value of Kenya Airways and the combined worth of nearly half of the firms listed on the Nairobi Securities Exchange (NSE).
KRA accused Keroche of defaulting on agreed plans to clear the tax arrears including a deal to pay half a billion shillings monthly inked in December.
In March, the brewer was offered 24 months to clear tax arrears amounting to Sh957 million which are undisputed.
The taxman said that the rest of the disputed taxes owed by the brewer would be handled through alternative dispute resolution agreements signed in 2021.
The KRA crackdown is a blow to Keroche which hoped to tap a spring of consumer patriotism among Kenya’s growing middle class to munch into EABL’s market share on the back of its Summit Lager and Summit Malt beers.
EABL is majority-owned by Diageo, and has dominated the marketplace with products like Tusker and Guinness beers as well as Johnnie Walker whisky and Smirnoff vodka.
It swept aside London-based SABMiller in Kenya in the late 1990s in what became known as the Beer Wars.
Keroche’s entry saw analysts talking of “Beer Wars 2”, which now looks at risk should KRA press with the multi-billion shillings demand.
The finances of Keroche, a private company, are not publicly available but it is expected to struggle to raise the billions of shillings if the KRA has its way, placing the brewer’s assets and those of its shareholders at risk.
Keroche’s founder, Tabitha Karanja, reckons that the KRA blockade was done without notice and in disregard of the difficult economic conditions.
She added in statements posted on her social media account that the company risks laying off over 400 employees “due to the illegal, punitive and draconian actions by the KRA”.
Ms Karanja linked the latest closure to the brewer failing to remit only one instalment of Sh30 million in April for excise duty arrears amounting to Sh195 million.
“The company still requests for a moratorium in order to have a head start and for reorganisation of finances both internally and externally for operations and for tax payment going forward,” said Ms Karanja on Twitter.
“It is worth noting that Keroche Breweries earned monthly revenues of between Sh400 million and Sh500 million pre-Covid-19. After the prolonged closure, the revenues dropped to below Sh50 million.”
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The tax battle looks set to be engulfed with political undertones after Ms Karanja, opted to join politics and bid for Nakuru’s senate seat.
Mrs Karanja has joined United Democratic Alliance (UDA), the party of Dr Ruto who is locked in a war of words with his boss over the presidential contest.
Unlike his predecessor Mwai Kibaki, Mr Kenyatta has announced an aggressive campaign for veteran Mr Odinga against Mr Ruto, who has been vocal about his own presidential ambitions.