KRA warns 5 banks over Keroche accounts freeze

The Kenya Revenue Authority (KRA) has threatened five top banks with multi-billion shilling penalties over their dealings with Keroche Breweries in the push to collect Sh9 billion in unpaid taxes.

The KRA has given the banks up to April 11 to transfer cash in Keroche’s bank accounts to the agency’s coffers.

The taxman says the five banks — Absa Kenya, Equity Bank, Diamond Trust Bank, Cooperative Bank and Standard Chartered — will pay the Sh9 billion should they fail to comply with the transfer order.

The KRA last Wednesday announced that it had won an appeal filed before the Tax Appeals Tribunal in 2015 and 2017 by Keroche, allowing it to proceed with the collection of the Sh9 billion.

“I hereby declare you to be an agent of the above taxpayer (Keroche) and require you to pay me Sh9.1 billion,” said the KRA notice sent to the five banks.

“If without reasonable cause you fail to comply with this notice, you shall be personally liable for the amounts specified.”

Keroche said it has been unable to transact on its accounts after the KRA sent the banks the agency notices — technically appointing the lenders as agents of the taxman.

The taxman has hinged its aggressive action on the Tax Procedures Act, which empowers it to seek taxes directly from third parties like banks, employers and suppliers as well as seize and auction property to recover unpaid tax.

The Act also gives the KRA powers to freeze tax cheats’ property transactions and ultimately auction the assets to recover the unpaid tax.

Keroche’s main asset is its brewing plant in Naivasha where it manufactures the Summit Lager and Summit Malt beers.

The taxman can post its staff to businesses owned by high-profile tax cheats, deploying them to the accounts departments, to recover unpaid taxes.

The KRA has also threatened to ground Keroche Breweries operations by denying the firm tax stamps affixed to beer, wines and spirits bottles.

“The law empowers KRA to discontinue issuance of excise stamps to taxpayers’ who are not complying with law in terms of payment of excise tax due,” said an advisory notice on Keroche seen by the Business Daily.

On Friday afternoon, troubled Keroche Industries secured temporary orders stopping the taxman from recovering Sh9.1 billion in taxes from its accounts. But KRA say it has not received the orders.

Keroche, which started by making spirits and wines in 1997 before diversifying into beer in 2008, has termed the KRA’s announcement to enforce the tribunal’s decision premature.

The company argued that production of its Vienna Ice did not amount to manufacture since the liquor is processed by diluting Crescent Vodka.

The brewer said that because of this, the two brands are one and the same product.

The taxman, for its part, relied on the Compounding of Denatured Spirits Act Cap 123 to argue that the process undertaken by Keroche amounted to manufacture of a new product.

The other disputes hinged on the classification of wines and the associated taxes. The brewer said that it only deals in fortified wine products that attract excise duty at a rate of 40 percent.