KRA Defends Its Position Over Closure of Keroche Breweries

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.

The taxman says that Keroche was required to collect taxes and remit the same to the KRA as stipulated by law, but it has consistently failed to do so.

“Keroche Breweries Ltd has been accorded the opportunity to comply with the tax laws. The Taxpayer has been collecting taxes from consumers but not remitting same to KRA,” read a statement from KRA.

It further noted that the company is not committed to tax compliance and has consistently failed to remit current taxes and also failed to honor the agreed payment plans.

“By allowing any taxpayer to continue collecting taxes and not remitting the same, KRA will not be executing her mandate of ensuring that taxes that fall due are remitted in a timely manner and that all taxpayers remit their fair share of taxes,” KRA said.

In its defense, KRA noted that allowing a manufacturer to sell their products without levying correct taxes or collecting taxes without remitting, will grant advantage the tax evaders over those who diligently pay their taxes.

“It will introduce distortions in the market that will end up killing tax-paying businesses at the expense of those that do not remit taxes. In the end, No taxes will be paid, and employment will be lost when the businesses close down as a result of competition from those not paying taxes,” said KRA.

Keroche’s dispute with KRA goes way back to 2006 when the taxman demanded dues such as Excise Tax of 467,704,167 shillings, VAT of 388,594,657 shillings, corporation Tax, and withholding tax of 737,333,959 shillings.

Since then, it has been marred with perpetual court cases that culminated in the two bodies entering into negotiations to resolve the Tax Cases amicably.

However, on August 14, 2018. Keroche failed and refused to sign the agreement forcing the matter to proceed with a full hearing before the tribunal.

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KRA began enforcement action against Keroche on March 11, 2020. The Alcohol manufacturer to High Court on March 16, 2020 challenging the case.

More developments followed and the tribunal released another judgment in regards to a set of appeals filed in 2015 and 2017 over taxes on Keroche’s Vienna Ice Brand of Vodka.

Keroche was required to pay another 7.9 billion shillings in taxes, pushing the total amount to 9.1 billion shillings.

The High Court, however, gave Keroche Breweries Ltd a reprieve against the enforcement measures by KRA by granting it stay orders on the condition that Keroche Breweries Ltd pays KRA security for tax of 500 million shillings.

Again, Keroche appealed the decision and on June 25, 2020, the Court of Appeal directed it to pay 100,000 shillings pending the hearing of the Appeal. They paid.

Following the stay Orders at the Court of Appeal, KRA and Keroche agreed to engage in Alternative Dispute Resolution (ADR) to resolve the matter out of court.

An agreement was entered to settle the matter in full and one that would allow Keroche to apply for remission of penalties and interests upon full settlement of the outstanding principal tax liability.

The agreements dated July 23, 2021, and On December 21, 2021, were adopted as the judgments of the High Court on February 12, 2022. This is the agreement that Keroche failed to honor.

Apart from these developments, KRA however notes that the 351 million shillings that led to the closure of Keroche Breweries was the principal tax that Keroche withheld for the period January 2021 to date and has not remitted the same to KRA.

This means that Keroche Breweries Ltd 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.

“KRA is committed to its mandate of revenue collection and trade facilitation. Addressing market distortions created by illicit trade which include non-payment of correct taxes is also trade facilitation,” the taxman said.

Read the whole statement below:

KRA MEDIA STATEMENT ON KEROCHE BREWERIES