•Management says business has been impacted by the pandemic, which has seen it struggle with a poor cash flow, as KRA sees Sh322 million arrears.
•It could not fully meet obligations such as taxes, utilities, salaries, suppliers, among others.
Image: JAMES MUNYA
Manufacturer– Keroche Breweries now says there is a need to create an enabling environment for businesses to navigate through the tough Covid-19 pandemic period, which has hard hit the economy.
This, as Kenya Revenue Authority (KRA) closes its factory over Sh322 million outstanding tax arrears that have accrued from February last year, putting more than 250 direct jobs on the line.
While the Naivasha-based brewer says it had explained why it failed to be up to date with the payment, the taxman has gone ahead to shut its operations a third time within one year.
According to Keroche, its business has been impacted by the pandemic which has seen it struggle with a poor cash flow that could not fully meet all the cash obligations of the company such as taxes, utilities, salaries, suppliers, among others.
“We subsequently entered into a proposed payment plan with KRA but we could not manage to honour the same due to frequent interruptions by KRA,” CEO Tabitha Karanja said on Friday.
CLOSURES
On December 7 last year, KRA closed the factory and issued agency notices to 36 banks in Kenya, a move management says completely collapsed all its business operations since it could neither produce, sell nor access any financing from any of the banks to assist in settling the arrears.
“We started negotiating for a payment plan and we requested for 24 monthly installments based on our financial projections which KRA rejected and insisted on six monthly installments. We proceeded with their proposal although we knew it was unrealistic since we wanted to have our plant re-opened and we were desperate to take our products in the market during the festive season," Karanja explained.
On December 22, the taxman allowed operations to continue but the earliest the company’s products could reach the market was on December 27, it says.
“We only managed to sell for three days till the end of the year but KRA were on our case demanding for the arrears according to the payment plan. We remitted Sh10 million which was available in our accounts then; which to them was insufficient,” Karanja said.
On January 10 this year the factory was shut again only to be re-opened after 15 days.
It took a week for Keroche to get revenue stamps, which would allow it to go into operations, management says.
Production commenced on January 22, and even before these products reached its markets, KRA struck again and closed the plant on January 31, Karanja explained.
“In such circumstances of operating less than a week, it was impossible for us to raise the amount of money KRA were demanding. We managed to make a further payment of Sh2.5 million within the short period we were in operation,” she said.
“ At this point, they refused to accept further negotiations, and the office of the Commissioner-Domestic Taxes Department, advised us that their hands were tied and we should seek support from the office of the Commissioner-General,” Karanja added.
Efforts to reach the Commissioner-General to resolve the stand-off have proved futile, management says.
The factory has remained closed from February 1, with over two million litres of beer worth about Sh 512 million in its tanks, which have fixed costs to a tune of about Sh30 million required to maintain the same monthly.
“This has drained all our resources and unfortunately if nothing is done in the next seven days, we will be forced to drain down all the beer and lay down over 250 direct employees and thousands within our nationwide distribution network,” she said yesterday.
The closure is also having an impact on hundreds of Kenyans who are indirectly involved in the distribution network.
The stand-off between Keroche and KRA has previously raised concerns over the killing of local industries while multinationals thrive.
Keroche, which commenced operations in 1998 has paid over Sh30 billion in taxes to the exchequer, according to its books.
"Where is @KAM_Kenya to speak on such issues we are going through? Where are the bodies that are meant to protect workers when their jobs are threatened?," Karanja posed on twitter.
Kenya Association of Manufacturers CEO Phyllis Wakiaga yesterday told the Star the lobby group will take up the matter.
APPEAL
Yesterday, the company appealed to President Uhuru Kenyatta to intervene, with an assurance of a certain operating environment free from harassment through closure on-premise, issues it says can be “amicably handled administratively”.
It has requested for the re-opening of its plant to prevent losses, while asking the taxman to give the company 12 months grace period on the taxes in arrears.
“The company will continue paying the current taxes as they fall due. This indulgence will enable the company to recover from its current financial woes, be able to settle all its outstanding liabilities and to have a new lease of life,” Karanja said.
She called on the National Assembly to formulate laws that extensively protect and cushion local enterprises, such as mandating the National Treasury and Planning Cabinet Secretary to give waivers or moratoriums, especially during difficult times brought about by a global pandemic.
At the height of the pandemic in 2020, the government announced a number of temporary measures in an attempt to mitigate the effects of Covid 19 on businesses.
They included a reduction in standard VAT rate from 16 per cent to 14 per cent, Corporate tax rate from 30 per cent to 25 per cent and pushing up the minimum taxable threshold for individuals for PAYE purposes.
The measures were withdrawn in 2021 despite the operating environment remaining unchanged.
Manufacturing, tourism, service sector and SMEs were among the most affected, with over 780,000 jobs lost.