DISPUTE

Home grown Keroche cries foul in tax battle with KRA

Founded in 1997 as a small wine maker, Keroche has grown to become a key brewer

In Summary

•According to Keroche, the Sh14 billion tax evasion claim does not add up based on its annual turnover

•CEO Tabitha Karanja says only dispute with KRA is on the applicable rate on its Viena Ice ready-to-drink vodka.

Keroche CEO Tabitha Karanja when she was arrested on Thursday on tax evasion at the Naivasha based factory on August 22, 2019.
Keroche CEO Tabitha Karanja when she was arrested on Thursday on tax evasion at the Naivasha based factory on August 22, 2019.
Image: GEORGE MURAGE

Keroche Breweries has locked horns with the taxman in yet another dispute which renews a series of tax and licensing stand-offs with authorities dating 16 years back.

In a public statement yesterday, the brewer which is in court for alleged tax evasion poked holes in the case being fronted by the Director of Public Prosecution (DPP), where the company is alleged to owe Kenya Revenue Authority (KRA) Sh14.4 billion.

 

According to Keroche, “the much-publicized” figures do not add up based on the firm's turnover.

Keroche has argued that for the last 13 years, it has been one of Kenya's largest taxpayers and in the last five years (January 2015 to June 2019), its total turnover of Sh18.5 billion yielded a tax remittance of Sh7.2 billion.

“Basically, 40 per cent of what Keroche produces goes to the government as tax,” Keroche CEO Tabitha Karanja said.

She and her husband Joseph Karanja were arraigned in court last Friday over tax evasion. They were later released on cash bail even as she decried selective and unfair targeting by KRA and the DPP.

“The presentation of an inaccurate file of accusation to the DPP, the deliberate publishing of false information to defame and destroy the reputation of a local Kenyan company reeks of malice, sabotage and not due process,” Karanja said.

To the DPP, the CEO said: “Rush decisions based on improper investigations may be populist but they damage more than what they achieve.”

Currently, Keroche Breweries manages a 1.1 million hectolitres, state-of-the-art breweries facility valued at Sh8.5 billion that employees 850 people directly and thousands indirectly.

 

If the company is to close today, the impact will be felt by hundreds of households and the community around its Naivasha plant.

Kenya National Chambers of Commerce and Industries’ President Richard Ngatia has since lamented the manner which the government is going after suspected tax evader, warning it could affect investments in the country.

Keroche woes started in 2003 when the Kenya Bureau of Standards refused to issue stickers to authenticate its alcoholic brands, leading to confiscation of its products.

Having taken a hit on wines and spirits, Keroche took the risks and invested in beer making opening its plant on October 24, 2008 with its flagship Summit Larger brand.

The move ended over 80-years of monopoly in the country's alcohol industry, which has for decades been dominated by multi-nationals led by Diageo, the parent company of East Africa Breweries Limited.

“Keroche breweries has innovated, pushed boundaries and serviced markets that previously were monopolized by multinationals,” Tabitha noted.

In August 2015, Keroche was omitted in a list of excise duty compliant firms. The manufacturer had obtained a court order to continue operating pending a hearing.

In 2016, it was locked in another dispute with KRA which wanted to close its business over a Sh1 billion tax bill on its ready-to-drink vodka.

Karanja yesterday said the only dispute with KRA on Keroche's desk is on the applicable rate on its Viena Ice ready-to-drink vodka.

“This is an ongoing matter at the Tax Appeals Tribunal, an institution mandated by law to handle such tax disputes,” she said, noting that hundreds of companies, both local and multinational, including its competitors are being arbitrated through “this tried and tested mechanism.”

Keroche is the second alcohol manufacturer to be apprehended by KRA in the last one month after liquor manufacturer Africa Spirits which is said to owe the taxman Sh41 billion.

Founded in 1997 as a small winemaker, Keroche ventured into spirits and eventually grew to become the first local large-scale brewer in the country.

Celebrated as the first local firm to break even in the beer-making industry, its journey has faced numerous challenges including market rivalry by its main competitor EABL.

Keroche has in the past accused its rivals of destroying its billboards and bottles, which in return affected its distribution network.