Companies

Keroche risks closure as KRA refuses to renew tax licence

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Keroche Breweries founder Tabitha Karanja during the launch of Summit Malt in 2013. PHOTO | FILE

Summary

  • The Kenya Revenue Authority has accused the brewer of incorrectly stating excise duty rates in returns and that the firms owes huge sums of cash in arrears.

The Kenya Revenue Authority (KRA) has refused to renew Keroche Breweries’ excise tax licence for the new financial year in a move that has threatened to stall the alcohol manufacturer’s operations.

KRA in a letter sent to Keroche last week says the alcohol manufacturer has been stating incorrect excise duty rates while filing its returns, and owes the taxman huge sums of money. The taxman, however, did not indicate how much the brewer owes it.

KRA adds that Keroche did not attach copies of its tax compliance certificate and those of its directors while applying for renewal of its licence in January. It has now ordered the brewer to cease production of any taxable goods, and to return unused excise stamps it was issued.

“Reference is made to our letter to you dated February 4 indicating that you failed to submit copies of valid tax compliance certificates for the company and its directors. In addition, your company has failed to declare correct excise duty rates, resulting in huge tax arrears,” reads the KRA letter.

“You are forthwith required to cease manufacture of excisable goods, pay excise for all goods manufactured by you, return all unused excise stamps issued to you by KRA.”

Keroche on Wednesday moved to court seeking to compel the taxman to reverse its decision, as it holds that KRA was yet to issue it with tax compliance certificates at the time it applied for renewal of the licence.

The brewer adds that its directors are separate legal entities hence asking for their tax compliance certificates is illegal.

KRA has also cited the Kenya Bureau of Standards (Kebs) cancellation of Keroche’s licence to produce its Crescent gin, brandy and whisky brands.

The cancellation has since been revoked by High Court judge George Odunga following a series of suits from various manufacturers, including Keroche.

The brewer now says the taxman can recover undeclared revenue, and that denying it a licence could cripple its operations despite the millions of shillings it pays in taxes every year.

READ: Keroche hires sales staff to push new plant output

Keroche managing director Kabutha Nduati adds that the firm had a legitimate expectation that its licence would be renewed after KRA failed to determine its application long after the 30 days stated in law.

“Keroche was not provided with any cogent reason as to why its application for renewal was rejected.

“KRA which was mandated to consider the application within 30 days from the date it was filed, failed to communicate any decision to Keroche.

It’s absurd for KRA to require Keroche to submit documents and information which is issued by it,” the brewer says.

Mr Nduati says in suit papers that the government is out to cripple Keroche, and that Kebs has colluded with KRA to ensure the brewer’s business collapses.

He further argues that collapsing the firm would leave its workforce of close to 300 in limbo.

“Keroche has invested heavily in setting up an ultra-modern brewery costing about Sh5 billion and KRA’s actions are clearly intended to cripple the applicant’s business.

“KRA communicated its refusal only after Kebs suspended Keroche’s permits, a clear manifestation of collusion by government agencies to paralyse the applicants business built from scratch by local investors,” Mr Nduati holds.

Keroche founder Tabitha Karanja has faulted the taxman’s claim for unpaid arrears, arguing that no specifics have been given on the alleged default.