I have always had great admiration for Keroche Breweries Ltd (Keroche) CEO Tabitha Karanja.
Listening to her narrate how she and her husband started from a room in Kariokor to owning one of the largest and modern breweries in Kenya has been inspirational.
When she narrated to us how her biggest competitor once bought all her then distinct bottles from the market to stop her from releasing products into the market, I was seething at the corporate Goliath crushing the hapless David.
Her brands have become household names.
So when she has had run-ins with the Kenya Revenue Authority over the years, I have been inclined to believe that she was the victim and not the villain that the taxman made her out to be.
Whereas I still admire her entrepreneurial journey, I no longer hold the position that she is the victim of a KRA hell-bent on destroying her business.
There are so many inconsistencies in the side of the story she chooses to tell compared to the realities of KRA’s efforts to get her to remit what she collects from Kenyans that it is difficult to keep standing by her.
A closer look at her own stories (even without hearing KRA’s side) shows a villain trying hard to look like a victim.
Last night alone on Citizen TV’s JKL Show, she admitted to making and dishonouring pledges to pay Sh500 million in 24 equal monthly instalments and another to pay Sh321m in 6 months instalments.
One of the areas that have brought a lot of confusion in the public is why Keroche Breweries has refused to remit payments to KRA or why KRA is not allowing Keroche to operate so that they can pay the taxes.
I think the confusion is caused by our understanding of what Excise Duty is.
By law, Excise Duty is due immediately after the product leaves the factory – it is part and parcel of the price of the product.
And by law, this money must be submitted to KRA on or before the 20th day of the following month failure to which penalties begin to accrue.
As a tax agent, Keroche holds this money in trust for the Government, and therefore, the people of Kenya.
This is public money that is not available to them to use as they wish because that would be a fraud.
Listening to Mrs Karanja on Citizen TV’s JKLive yesterday, she seemed to be surprised that they should have been remitting taxes to KRA monthly.
“It was a simple request after realizing we owe them 322 million.” – Mrs Karanja told JKL.
How does someone who has been in business for 25 years suddenly realize 12 months later that a tax liability they are supposed to settle every month is owing?
Do they not have accountants at Keroche?
And for a company that has had an Excise Duty dispute with KRA for nearly two decades, how can payment of Excise Duty skip their mind?
How do you forget the single biggest cause of trouble for your company since its inception?
This is either arrogance on the part of the owners – what CJ Willy Mutunga called the uta-do mentality or gross incompetence on the side of Keroche’s management – and both spell doom for the local brewer.
I do not see how this was an oversight – this was a deliberate effort to collect money from Kenyans and refuse to remit it to KRA.
No other explanation makes sense.
It is interesting how Mrs Karanja is always keen to bring up their dispute history beginning in 2002 without acknowledging the numerous milestones the dispute has evolved into.
The truth is, there have been major developments around this dispute that no longer necessitate bringing up the history over and over again unless the purpose is to gain public sympathy based on a false narrative.
So just briefly, here are the FACTS as they stand with two key developments coming in 2021.
Keroche voluntarily agreed to enter into an alternative Dispute Resolution with KRA on two fronts.
KRA launched the Alternative Disputes Resolution (ADR) Framework in 2015 to among others provide a taxpayer focused approach to dispute resolution by allowing the taxpayer to seek an amicable resolution to their disputes alternative to litigation/appeal and to provide an additional approach for dispute resolution to complement the existing internal dispute resolution mechanisms provided in the Tax Procedures Act.
Both ADR processes were concluded and the two parties signed the consent.
By the agreement of 23rd July 2021, Keroche agreed to owe a total of Kshs. 272,211,842 comprising of Kshs. 134,447,847 in principal taxes and Kshs.137, 763, 995 in interest and penalties.
They offered to pay the principal taxes of Kshs. 134,447,847 in nine (9) monthly instalments starting from 25th September 2021.
She did NOT honour the agreement.
By the agreement of 21st December 2022, a tax of 7,546,317,309 was agreed to be owing and payable.
Keroche Breweries Ltd proposed to pay Kshs. 500,000,000 in 24 equal instalments starting on or before January 15 2021 and exercised their right in law to apply for abandonment of Kshs. 3,998,561,062 from the National Treasury while at the same time reserving the right to apply for “forgiveness” of the penalty and interests AFTER clearing and/or abandonment of the principal taxes.
This agreement was signed by Mrs Tabitha Karanja herself. She did NOT honour the agreement.
To listen to her on TV vehemently denying a tax liability she acceded to herself in writing was quite shocking.
It’s no wonder that KRA does not trust any pleas she makes for leniency when she can publicly disown her own signed agreements with the tax collector without batting an eyelid.
Those wondering why KRA came for the full amount owed by Keroche in February, should know that the law requires KRA to do so in the event of a default of payment on the agreed instalments.
“Where a taxpayer who has been permitted to pay a tax by instalments under subsection (2) defaults in the payment of an instalment, the whole balance of the tax outstanding at the time of default shall become immediately payable.”- Section 33(4) of the Tax Procedures Act.
In a series of tweets published on her Twitter handle, Mrs Karanja lamented the few days they had to sell products before KRA again came calling.
The matter she has refused and/or chosen to address is where the money she had been collecting the whole year had gone to!
And to blame COVID-19 is very disingenuous.
2021 was a good year for the alcoholic drinks industry. Keroche’s main rival had a 15% jump in sales leading up to the end of the fiscal year 2020/2021 in June 2021.
Their half-year profit more than doubled to a five-year high in the second half of 2021!
Whereas Keroche is nowhere near the size of EABL, one would reasonably expect that their sales would correspondingly improve, even if you discount the effects of COVID-19 that may have hit the smaller company harder than their bigger competitor.
Keroche themselves self-assessed their tax obligations for the year through their fillings to be 279,958,530 by December 14, 2021, just before they signed the mediated agreement.
Where did they take this money because we know for a fact they collected this money?
Is the company diverting the public money they collect from taxpayers to some other activities?
When all is said and done, Keroche Breweries does not have a KRA problem – it has a management problem.
And no matter how many more concessions KRA grants it, it is highly unlikely they will ever fulfil their obligations if the status quo is maintained.
If this was a company with a proper board in countries like the US, they would have kicked her out as CEO a very long time ago.
It is time Mrs Karanja professionalized the management of Keroche Breweries or it will inevitably collapse!
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