Tabitha: Keroche cannot raise Sh500 million for KRA

Everyone is struggling. And afraid. The coronavirus pandemic has practically shut down the world. No one knows what the future holds. But for one of many successful local enterprises, it is a desperate race against time.

On March 16, High Court judge David Majanja gave Keroche Breweries 30 days to deposit Sh500 million -- or else an order barring the KRA from demanding Sh9.1 billion in tax arrears would lapse. The matter comes up in court on April 23.  

The ruling was a reprieve for the company in a long-running battle over backdated taxes Keroche fiercely disputes as false.

CEO Tabitha Karanja says the company doesn’t have the money. Her future is in jeopardy, as are those of more than 300 employees and the thousands whose livelihoods, directly and indirectly, depending on the Naivasha-based brewery. They could all be without a job in a matter of weeks.

Tabitha requests the government to step in to halt what looks like the impending closure of a family business she has nurtured from scratch to international stature over 23 years.

“Looking at the way things are, because of the coronavirus epidemic, we are suffering. You see u see bars have been closed, businesses have been closed. So, looking at things from the business perspective, we cannot meet that deadline,” she told the Star in an interview.

“We are praying the government will consider this so we don’t see a local company closing because of tax allegations. This is not something that is proven. We need to go to court to prove that we do not owe KRA this amount of money.”

That bars have been ordered closed indefinitely, denying Keroche considerable income, is not the only problem. The company has the option of appealing the court ruling, but the Judiciary has significantly scaled-down its work due to the pandemic. Filing an appeal at this time is difficult.

“That is another setback. Our lawyers are working day and night to make sure that we are able to appeal,” Tabitha said.

Judge Majanja’s ruling arose from an application filed by Keroche challenging a decision by the tax appeal tribunal, which allowed KRA to recover arrears totalling Sh9,116,835,985.

The brewer challenges the backdated taxes payable for its ready-to-drink Vienna Ice vodka. KRA says Vienna Ice is a fermented beverage, which attracts 60 per cent excise duty, and is not a not fortified wine, which attracts 40 per cent.

However, Keroche says the product is in the correct category since it is a diluted version of Crescent vodka. The tax tribunal ruled that Vienna Ice falls under the category of fermented beverages.

KRA demanded Sh1.1 billion from Keroche in 2006 and backdated taxes on Vienna Ice by five years, resulting in a court case.

“I have gone through many challenges but this is one of the biggest because of the coronavirus pandemic, which has made many businesses and the Judiciary virtually close,” Tabitha said.

“As we are thinking about how to get this money, even borrowing from banks, no business is moving.”

Keroche’s CEO says the company’s woes have little to do with tax arrears. She says she is being fought by powerful forces. The government has created a hostile environment for local investors in favour of foreigners, she argues.

“The biggest war we are fighting is a gang of multinationals trying to kick out local businesses from breaking up their monopolies,” she said.

Tabitha contends that the tax arrears demanded from Keroche go as far back as 1997. They arise from changes in tariffs that the High Court ruled amounted to an abuse of authority by the KRA.

She says Africa multinationals dominate the economies and local enterprises get little support from governments to thrive. Government agencies, she said, are sometimes used to frustrate indigenous firms, push them out of business and create room for multinationals.

“I have been in this business for 23 years and have always said we need to protect local companies,” Tabitha said.

“I have a right to say that multinationals use government agencies to fight local businesses.”

She doesn’t identify the foreign companies she alleges are trying to undermine her company but say sometimes the government agencies that are misused are not aware of the true agendas of those multinationals.

The competitors, Tabitha says, know that the moment a company is issued with tax demands they are treated as “black sheep” in the business community.

“You are branded as a  person who doesn't pay taxes so no one wants to come near you," she said.

“We need to grow our own businesses. The only way to end poverty is to grow your own businesses.”

Tabitha says support for local businesses is not a favour the government grants investors. The government is a big stakeholder in local investment. The money local businesses make remains in the country while multinationals repatriate profits to their countries.

“Even though our faith in the cause of Kenyan entrepreneurship remains unshaken, it is time to voice the question being asked across Kenya – how does a local enterprise survive in such a hostile environment?” she asked.

President Uhuru Kenyatta’s Big Four Agenda for national prosperity includes promotion of manufacturing to create jobs and wealth.

“I know we deserve better. But we are not asking for better treatment like those multinationals. We all have equal rights. We need an enabling environment so that we can do business. That is all we want. We do not want free things.”

Started in 1997 with a single alcoholic brand, Keroche has grown into 15 brands. The battles with KRA have disrupted new products the company was planning to launch.

Tabitha says she typifies the Kenyan go-getter spirit and will do everything she can to save Keroche.

“I represent who we are: From a very humble background, hardworking, like everybody in Kenya. Given an opportunity, believe me, we can do things,” she says.

(Edited by V. Graham)

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