KRA’s Incessant Interruption Affected Our Financials, Keroche

On Tuesday, March 8, KRA has issued a statement defending its position against the measures it took against Keroche Breweries for failing to honor the agreed payment plans for the defaulted taxes.

In the statement, which is detailed here, KRA said that Keroche Breweries has been collecting taxes from consumers but not remitting the same to KRA – and this led to its closure.

This prompted a lengthy response from Keroche, which emphasized that the ground for closure was due to outstanding tax arrears of 322 Million shillings that accrued from February 2021.

The company stated that the failure to be up to date on the payments was explained to KRA that Keroche could not fully meet all the cash obligations of the company (taxes, utilities, salaries, suppliers,) due to reduced business activities that led to poor cashflows.

Keroche said that it could not honor the agreement with KRA due to consistent interruptions from them.

The company noted that on 7th December 2021 KRA closed the factory and further issued agency notices to 36 Banks in Kenya. This completely collapsed all business operations since the company could neither produce, sell, nor access any financing from any of the banks to assist in settling the arrears.

Keroche began negotiating for a payment plan and it requested 24 monthly installments based on its financial projections which KRA rejected and insisted on six monthly installments.

“We proceeded with their proposal although we knew it was unrealistic since we wanted to have our plant re-opened and we were desperate to take our products in the market during the festive season,” Keroche said in a statement.

It further went on to explain that on 22nd December 2021 KRA re-opened, but unfortunately, the earliest their products could reach the market was on 27th December 2021. Keroche only managed to sell for three days till the end of the year but KRA was on their case demanding the arrears according to the payment plan. The company remitted 10 million shillings which were available.

The factory was shut down again on 10th January 2022 by KRA, which also rejected Keroche’s re-negotiated payment plan of 24 installments.

ALSO READ: KRA Defends Its Position Over Closure of Keroche Breweries

When the company was reopened on January 15^th, 2022, Keroche needed revenue stamps which it had to apply and it took a further one week to get approval and issuance from KRA.

Production began on 22nd January 2022 and even before the products reached the markets KRA closed the company again.

“In such circumstances of operating less than a week, it was impossible for us to raise the amount of money KRA were demanding. We managed to make a further payment of Kshs.2.5 Million within the short period we were in operation. At this point, they (KRA) refused to accept further negotiations, and the office of the Commissioner-Domestic Taxes Department advised us that their hands were tied and we should seek support from the office of the Commissioner-General. Since then, we have been trying to reach and even going to his office but we have been unable to reach him for his intervention,” Keroche explained.

According to Keroche, it has over 2 Million liters of beer worth about 512 Million shillings stuck in its stores. The stock has fixed costs to a tune of about 30 Million required to maintain the same monthly.

“This has drained all our resources and unfortunately if nothing is done in the next seven days, we will be forced to drain down all the beer and lay down over 250 direct employees and thousands within our nationwide distribution network,” explained Keroche.

The company is, therefore, appealing to the Commissioner-General:

• Assurance of a certain operating environment free from any harassment, unexplained tax demands, punitive taxation introduced on our products leading to their being wiped out of the market.
• To kindly but urgently request the re-opening of the plant to prevent huge losses and enable the company to resume production, sales, and distribution, and most importantly protect and safeguard the livelihoods of thousands of Kenyans employed by the company both directly and indirectly.
• To kindly request the lift the agency notices with the 36 banks to enable Keroche to access financing.
• To kindly give them an audience as one of the indigenous enterprises.

Keroche also appealed to the KRA to give the company 18 months grace period on the taxes in arrears. However, the company will continue paying the current taxes as they fall due.

Read the whole of Keroche’s Response to KRA’s Statement here.