Keroche seeks 18-month period to pay Ksh.322M tax arrears

Keroche Breweries Limited is now seeking an 18-month grace period before regularizing the payment of current taxes to the Kenya Revenue Authority (KRA) which it estimates at Ksh.322 million.

In a statement issued on Wednesday, Keroche insisted that a poor business environment has left it unable to foot the tax bill which covers the period from February last year to January 2022.

“Failure to be up to date on the payments was explained to KRA as low business leading to poor cashflows that could not fully meet all the cash obligations of the company including taxes, utilities, and salaries,” Keroche stated.

Even after entering payment plans to clear the arrears, Keroche has failed to honor the new agreement; a matter it blames on ‘frequent interruptions’ by the taxman.

By seeking the 18-month tax service suspension on the arrears, Keroche is hoping to resume operations even as it plans to meet future current taxes as they fall due.

At the same time, Keroche has requested that KRA lifts agency notices issued to 36 banks to allow it access to new loans to finance its operations turnaround.

Moreover, Keroche is seeking an audience with KRA’s Commissioner-General Githii Mburu.

On Tuesday, KRA defended its closure of the brewer’s main plant in Naivasha indicating the company was likely using collected taxes as working capital to finance its operations instead of remitting the same to the taxman.

“It is important to note that these are self-assessed tax declared by Keroche Breweries Ltd in its monthly returns but not remitted. It can only mean the taxpayer may be using taxes collected to fund the company’s operations or for other private purposes,” KRA said.

“To allow a manufacturer to sell their products without levying correct taxes or to collect taxes without remitting will amount to granting those evading taxes undue advantage over the many law-abiding taxpayers who diligently pay their taxes.”

In the bigger picture, Keroche Breweries and KRA are embroiled in a 16-year litigation battle relating to taxes in excess of Ksh.20 billion.

The bulk of the years-long dispute related to the re-classification of taxes on alcoholic beverages products over the years a matter which has seen the pair drag each other to courts and to the Tax Appeals Tribunal (TAT).

Both KRA and Keroche have previously attempted to use the Alternative Dispute Resolution (ADR) mechanism to address the elongated tax dispute.

The tiff between KRA and Keroche threatens to completely close the 25-year-old alcoholic beverages manufacturer putting at risk at least 250 direct jobs.

The Kenya Association of Manufacturers (KAM) and the Kenya Private Sector Alliance (KEPSA) have volunteered to mediate the tax dispute between the pair.