Relief for Keroche as KRA backs off in Sh957 million tax dispute

Keroche Breweries has received green light from the Kenya Revenue Authority (KRA) to resume operations, after a successful agreement on a plan to settle close Sh1 billion tax liability.

KRA, in a statement on Wednesday, said it had agreed with Keroche on a payment plan on taxes owing and not in dispute, that would see the brewer settle Sh957 million within two years.

“The payment plan which is contained in an addendum agreement to the two Alternative Dispute Resolution (ADR) Agreements signed between the two parties in 2021 was arrived at and signed on March 14, 2022 after week-long negotiations.

“The addendum agreement which sets the stage for the reopening for production of the Naivasha based brewery will see Keroche settle an undisputed tax amount of Sh957 million over a period of 24 months starting from January 2022,” the statement by KRA’s commissioner for legal services and board coordination read in part.

KRA, in a turnaround strategy as it said it is now encouraging “dialogue and amicable resolution of tax disputes”, also committed to lift agency notices it had issued to 36 banks in the country, starving the company of funding and affecting its financial operations.

“The signed addendum agreement will also see KRA lift agency notices issued to 36 banks,” KRA stated.

The move by KRA is a result of negotiations between the two beginning March 10 when KRA Commissioner-General, Githii Mburu, invited the company for talks, following weeks of frictions that saw the authority shut its operations at least three times, since December 2021.

Keroche Managing Director, Tabitha Karanja, broke the silence about two weeks ago and brought the issue to limelight when she publicly complained of harassment the company had received from KRA and warning that the brewer was on the verge of losing at least Sh500 million in stock and 250 employees.

Her cries elicited public fury as the taxman was yet again accused of frustrating local businesses.

But KRA on March 8, in an indication that it was ready to handle the company head-on rather than talk, released a statement claiming that tax disputes with Keroche summed to over Sh22 billion.

“Keroche Breweries Ltd has been accorded the opportunity to comply with the tax laws. The Taxpayer has been collecting taxes from consumers but not remitting same to KRA. The Taxpayer has not demonstrated any commitment to comply but has consistently failed to remit current taxes and also failed to honour the agreed payment plans,” KRA stated.

Ms Karanja on March 9, accused KRA of frustrating negotiations they have had by shutting down the brewer on three occasions between December 7, 2021 and January 28, 2022 and issuing agency notices to banks.

She termed the authority’s actions business war against local enterprises.

Ms Karanja said the bulk of tax disputes constituted claims on products KRA had approved and classified in a particular tax tariff about two decades ago, only to later re-classify them to a higher category and demand taxes for the products already sold.

“How can KRA issue a start up with a tariff for a product, allow that company to manufacture for 10 years, collect taxes, then turn around and issue an assessment based on a different higher tariff and backdate it by 5 years and send a demand on monies that they know were never collected?” Ms Karanja posed.

The disputes which played on in public made KRA call for the negotiations that have now resulted in the current development, even as KRA in the Wednesday statement said that the agreement would “see the rest of the taxes owing from Keroche dealt with as was agreed between the two parties in the ADR agreements already signed.”

Ms Karanja could not be immediately reached to confirm when the company would resume operations.