Troubled beer-maker Keroche Breweries has sent home 370 workers on indefinite unpaid leave following a protracted tax dispute with the Kenya Revenue Authority (KRA) that has seen it shut down its operations for months.
The brewer said on Thursday it has decided to send its workers home after operational funds dried up following the taxman’s closure of the firm on May 15.
KRA has vowed not to reopen the brewer, accusing it of disregarding a deal to stagger payment of taxes and failing to pay excise taxes even after the taxman lifted the blockade on the plant in March.
“Yes it is true we have asked our workers to proceed on unpaid leave as we have run out of funds to run the company,” said Tabitha Karanja, the CEO.
“We consider the decision by KRA to close our plant illegal and we will fight it,” she added.
In an internal notice to employees seen by the Business Daily, Keroche asked its employees to proceed on unpaid leave.
“It is almost two months since the packaging line was closed by Kenya Revenue Authority due to the Tax issue which you are all aware of. The management has tried to sustain the business despite the disruptions and closure, which has left the Company paralyzed with no means of getting any income to cater for its operational cost, pay salaries and other financial obligations, leading to several months of accumulated salary arrears,” said the brewer in the memo to staff.
“In this regard, the management has had to make a difficult decision to release all employees from work. We shall only retain the service of a few persons from the quality department and engineering maintenance,” it said.
Mrs Karanja said the brewer was unable to shoulder a workers' monthly bill of Sh20 million and had been unable to sustain them any longer owing to the closure.
KRA Commissioner General Githii Mburu said Keroche has breached terms of tax arrears payments and failed to pay a cent in duty from beer sales since its March reopening.
He added that Keroche was aware that the March agreement allowed the taxman to take enforcement action following a breach in payment terms.
“We also agreed they will remain up to date on current taxes so that when they sell, they will be remitting the dues. When they paid the initial payment and we reopened their facility, we waited for them to honour the payments but that did not happen,” said Mr Mburu.
“The taxpayer did not honour the payment plan agreed upon for the third time…to allow a tax-evading business to continue operating despite it dishonouring all payment plans is to promote a culture of impunity, promote unfairness and allow a few to use public funds to enrich themselves.”
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Owned by the Karanja family, Keroche previously linked its woes to a Sh351 million demand, but KRA painted the brewer a cheat who owes the State more than Sh22 billion in unpaid taxes.
In March, the brewer was offered 24 months to clear tax arrears amounting to Sh957 million which are undisputed.
The taxman said that the rest of the disputed taxes owed by the brewer would be handled through alternative dispute resolution agreements signed in 2021.
The KRA crackdown is a blow to Keroche which hoped to tap a spring of consumer patriotism among Kenya’s growing middle class to eat into EABL’s market share on the back of its Summit Lager and Summit Malt beers.