Thread by @mmnjug

.@KRACare has disclosed that the troubled Naivasha-based Keroche Breweries @keroche_ltd owes it Sh22.79B in unpaid taxes, darkening the future for the brewer that challenged the mighty @EABL_PLC by @BD_Africa

The taxman in an unprecedented move offered a blow-by-blow account of the 16-year-long battle with Keroche, including details of unpaid corporate tax, excise duty, VAT and penalties of Sh3.02B.

The KRA’s revelation was in response to Keroche’s plea for President Uhuru Kenyatta’s intervention after the authority shut the operations of the beer maker and froze its dealings with 36 banks, further exacerbating the situation.

Keroche, owned by the Karanja family, linked its woes to a Sh351M demand. But the @KRACare painted the brewer as a cheat who owes the State over Sh22B in unpaid taxes.

At Sh22.79B @KRACare is demanding what is a near equivalent of the Sh24.9B that @SafaricomPLC, East Africa’s most profitable company, paid the KRA. It is more than the market value of @KenyaAirways and the combined worth of nearly half of the firms listed on the @NSE_PLC.

.@KRACare accuses @keroche_ltd of defaulting on agreed plans to clear the tax arrears, including a deal to pay half a billion shillings monthly from December to clear a Sh4.49B debt.

The Sh4.49B was part of a Sh7.54B tax demand, which included penalties of Sh3B. Keroche appealed to the @KeTreasury to write off Sh3.99B on agreement it would pay the Sh4.49B. The Treasury is yet to respond to the request.

The KRA crackdown is a blow to Keroche that hoped to tap a spring of consumer patriotism among Kenya’s growing middle class to munch into EABL’s market share on the back of its Summit Lager and Summit Malt beers.

.@EABL_PLC, majority-owned by Diageo, has dominated the market with products like Tusker and Guinness beers as well as Johnnie Walker whisky and Smirnoff vodka. It swept aside London-based SABMiller in Kenya during the beer wars of the late 1990s.

Keroche’s entry saw analysts talking of “Beer Wars 2”, which now looks unlikely should the KRA press with the multi-billion shilling tax demand.

The finances of Keroche, a private company, are not publicly available but it is expected to struggle to raise the billions of shillings if the KRA has its way, placing the brewer’s assets and those of its shareholders at risk.

The tax battle looks set to stoke political undertones after one of Keroche’s founder, Tabitha Karanja, opted to join politics and bid for Nakuru’s senate seat.

Mrs Karanja has joined United Democratic Alliance (UDA), the party of Deputy President William Ruto who is locked in a war of words with his boss, Mr Kenyatta, over presidential succession politics.

Unlike his predecessor Mwai Kibaki, Mr Kenyatta has announced an aggressive campaign for veteran opposition leader Raila Odinga against Mr Ruto, who has been vocal about his own presidential ambitions.

The Sh7.54B tax demand revolved around Keroche’s production process. The company argued that production of Vienna Ice did not amount to manufacture since the liquor is processed by diluting Crescent Vodka, and because of this, the two brands are one and the same product.

.@KRACare on its part, relied on the Compounding of Denatured Spirits Act Cap 123 to argue that the process undertaken by Keroche amounted to manufacture of a new product.

The other disputes hinged on the classification of wines and the associated taxes. The brewer said that it only dealt in fortified wine products that attract excise duty at a rate of 40%

But the KRA maintained the brewer ought to pay excise taxes at a higher rate of 60% since it does not produce products in the category on which the lower rate is applicable.

.@keroche_ltd and @KRACare pursued an out-of-court settlement, leading to the Sh7.54B deal. On the Sh351B demand, the KRA reckons that this is tax that Keroche collected and failed to remit.

This means that Keroche has been collecting excise duty tax and VAT from its consumers through the sale of its products but has not been remitting the taxes to KRA. - @KRACare .

The two tax cases, according to the taxman, have informed its aggression against Keroche, which started by making spirits and wines in 1997 before diversifying into beer in 2008

The taxman has hinged its aggressive action on the Tax Procedures Act, which empowers it to seek taxes directly from third parties like banks, employers and suppliers as well as seize and auction property to recover unpaid tax.

Cars, land, homes, office blocks, companies and workplace equipment are on the KRA’s radar at a time when it has stepped up the war against those it perceives as tax cheats.

The founders of Keroche are also battling a suit on suspicion of evading taxes amounting to Sh14.4B, a further twist to the firm’s perennial wars with the revenue agency.

Mrs Karanja and her husband Joseph Karanja were arrested in August 2019 for alleged tax evasion in their alcohol production business since 2015.

The tax battles between brewer @keroche_ltd and @KRACare over unpaid taxes bit.ly/3pOov5Y via @BD_Africa