Companies

EAPCC defaults on Sh3.6 billion staff and tax dues

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Portland Cement staff at work. FILE PHOTO | NMG

East African Portland Cement Company (EAPCC) has defaulted on taxes and salaries amounting to Sh3.6 billion, underlining the financial woes of the State-owned firm.

The amounts were due as of June, according to the Auditor-General’s review of EAPCC’s financial statements.

“In addition, due to cash flow constraints, the company has been unable to settle amounts due to statutory authorities which include Pay As You Earn (PAYE) of Sh1.7 billion, Value Added Tax (VAT) balance of Sh247 million and pension liabilities of Sh159 million being principal, penalties and interests,” reads part of the audit report in EAPCC’s latest annual report.

“Further, the company has … unpaid salaries based on the Collective Bargaining Agreement (CBA) terms with an estimated total exposure of Sh1.5 billion.”

The Kenya Revenue Authority (KRA) had assessed the tax payable at Sh2.6 billion and the amount was reduced to Sh1.7 billion. This followed an audit of the cement manufacturer’s corporate taxes, employee taxes, withholding tax and VAT from 2005 to 2008.

Read: Former workers allowed to seize Sh1.3bn from EAPCC

EAPCC has paid Sh122 million and appealed against a further Sh473 million through the local committee, which subsequently ruled in favour of the company.

“KRA, however, filed a notice to appeal in the High Court against the Local Committee ruling. The substantive appeal to the High Court has, however, not been filed by KRA. The view of directors is that no additional liabilities will arise from these matters,” the company said.

EAPCC’s former employees have meanwhile been allowed to seize the company’s bank accounts to enforce their claims, following a decision by the Court of Appeal last week.

A Bench of three judges said the cement company has previously obtained orders from the court on terms, which it has not bothered to fulfil.

Justices Asike Makhandia, Kathurima M’Inoti and Mumbi Ngugi further said the Athi River-based company also voluntarily entered into a consent order with about 700 former employees but failed to honour the agreement.

“As a result of cash flow constraints, the company has been unable to settle the amounts owed to its key creditors, including Kenya Revenue Authority and retirement benefit schemes,” EAPCC said in the report.

The company has been making losses, a move that has seen it rely on the sale of its land holdings to pay part of its debt.

Read: State finds buyer for Sh15bn stake in Portland Cement

EAPCC raised Sh2.1 billion from the sale of land in the year ended June when it also made debt repayments amounting to Sh2.1 billion.

The company posted a loss of Sh1.3 billion in the review period, reversing a net profit of Sh541.5 million a year earlier, which was largely due to gains on its investment property.

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