Keroche bosses to appear in court Monday over KRA tax row

Keroche Breweries chief executive officer Tabitha Karanja

Keroche Breweries chief executive officer Tabitha Karanja addressing the media on March 9, 2022. 

Photo credit: Diana Ngila | Nation Media Group

Alcoholic beverages manufacturer Keroche Breweries' tax row with the Kenya Revenue Authority (KRA ) looks far from over.

The revelations have emerged after Keroche Breweries owner Nakuru Senator Tabitha Karanja claimed that the company's officials including the Chief Executive Officer (CEO) and the chairman have been asked to appear in court on Monday, February 6, over a pending suit in connection with alleged tax fraud.

In a detailed statement on her Twitter account, Ms Karanja sought to give details surrounding the tax controversy that saw the leading alcoholic drinks manufacturer close down about six times last year.

"We have received a letter from the Director of Public Prosecutions through our lawyer, that the chairman and the chief executive officer of Keroche Breweries are required to appear in court on February 6, for the mention of a pending case over tax. This is very sad since the alleged tax fraud is not true," reads part of her statement.

In the statement, Ms Karanja sought to explain the source of the company's protracted Sh14.1 billion tax row with the tax man.

Ms Karanja claims that the alleged tax arrears arose from the manufacture of one of its brands -The Viena Ice Ready to drink vodka.

"Our Viena Ready to Drink Vodka is produced by diluting the 40 per cent Crescent Vodka, with our naturally distilled water from our source to make it 15 per cent. This is similar to the way a customer can walk to a bar, purchase six tots of vodka equal to 188 ml of vodka and the bartender fetches a 312ml of water from his tap and mixes the two to make 500ml Ready to Drink Vodka. But unlike the barman, Keroche Breweries would use its 312ml naturally distilled water from our brewery source and use its 21st-century technology to mix uniformly to precision for moderate drinking," Ms Karanja explained.

"Now the alleged tax arises from KRA computations subjecting the 101 million litres of our water used to dilute the 60 million litres of Vodka at a rate of Sh 120 per litre amounting to Sh 12.1 billion and the resultant Sh 1.9 billion VAT. This amounts to Sh 14billion, the alleged tax fraud," she further explained.

Excise stamps

The CEO further claims that KRA facilitated Keroche with 329,424,019 excise stamps for the packaging of the ready-to-drink vodka during the period and collected a 7.3billion excise tax for the 60 million litres of Crescent Vodka used. 

According to Ms Karanja, KRA had last year indicated that it was ready to withdraw the case and resolve the row with Keroche Breweries outside the court.

KRA has however failed to withdraw the case.

She questioned KRA's motive to continue pursuing the case.

"Our worry is why now? The timing is wrong because we are currently in negotiations to revive Keroche Breweries with financial institutions which are likely to jeopardise, I condemn the move to continue pursuing opaque tax arrears" stated Ms Karanja.

She claims that Keroche has suffered a loss of Sh 20 billion in the closures in a period of three years due to Covid-19 and KRA. 

Keroche has been eyeing more than 20 per cent of the market share with a production plant that has the capacity of producing 30 different brands.

The company has enjoyed steady growth since its inception 18 years ago.

But it has been in the crosshairs of the taxman in recent years after Commissioner-General Githii Mburu trained its guns on the alcohol industry in his quest to seal tax leakages in the sector.

Last year, Ms Karanja announced a plan to lay off 400 workers after the row led to the closure of the factory for months.

However, they later reached an agreement with KRA and the firm was reopened.