Keroche gets reprieve in Sh9.1 billion tax dispute

Keroche Breweries has received temporary reprieve after the High Court extended an order barring Kenya Revenue Authority (KRA) from attaching its account over a Sh9.1 billion tax dispute.

Justice David Majanja extended the order to May 7, when he will rule on an application by the Naivasha-based brewer for a review of his directive, requiring Keroche to pay Sh500 million to KRA.

Last month, the judge directed Keroche to paythe amount within 30 days, pending hearing of an appeal the brewer has filed, disputing the tax demand.

But Keroche, through lawyer Kimani Kiragu moved back to court arguing that the downturn of businesses as a result of the Covid-19 pandemic makes it impossible to pay the amount.

He told justice Majanja that insisting on payment will destroy the business, cause loss of jobs, income for its suppliers and remittances to KRA, since it is a large taxpayer.

In the application for review of the Sh500m pay order, Keroche CEO Tabitha Karanja said the directive was made during a very difficult time, with the country suffering from the Covid-19 pandemic.

She added that the brewer can only raise the amount through a bank loan, but which was not possible because it was servicing another loan to Absa Kenya.

KRA argued that the tax due was much higher than Sh500 million and it was the duty of a taxpayer to honour their obligations.

At the same time, Keroche has written to KRA through its tax advisers asking for the Alternative Dispute Resolution, which is provided for under Section 55 of the Tax Procedures Act.

The company is contesting the Sh9.1 billion tax demand, and has accused KRA of reclassifying its products and backdating uncollected taxes, all in a bid to squeeze more from the firm.

At the heart of Keroche’s latest troubles is one of its most popular products, Viena Ice Vodka, which KRA wants taken off the list of fortified wine products.

The taxman argues that the fortified wine products list is reserved for grape-based drinks, while Vienna Ice is made from fermented pineapples.

But Ms Karanja said Viena Ice is simply a diluted version of Crescent Vodka, another of the brewer’s products, with water hence the process cannot be equated to manufacture.