Being a law-abiding Kenyan Company, Keroche Breweries Limited says it did not want to discuss anything that is in court but because one of the most respected institutions in the Republic of Kenya has decided to put this information in the public domain. Here below it responds respond based on KRA statement.
We would never want to be seen to be engaging in a back and forth with one of the most respected Kenyan institutions, KRA. It is with a lot of humility that we seek to respond to what KRA has explained to the Kenyan public on the brief history of the dispute between Keroche Breweries and KRA. We wish to respond as follows:
Keroche Breweries Limited (Keroche) was established 25 years ago and, from a very humble beginnin, has grown to be the largest, fully locally owned brewery in Kenya, and in the East African region. Keroche is globally recognized for ending the 80-year-old monopoly in Kenya’s alcòholic beverages industry.
Keroche now stands as a state-of-the-art brewing facility with a capacity to produce 1.1 million hectolitres per year of beer and spirits and wine line with a capacity of 10,000 bottles per hour and 15,000 bottles per hour respectively. Keroche has directly employed hundreds of workers and is a source of livelihood for thousands of others through its distributorship and retail supply chain.
For the last 16 years, the Kenya Revenue Authority (KRA) has classified Keroche as a large tax payer. Keroche’s current annual tax remittances amount to approximately Ksh2 billion. The firm has been progressively working to capture increased market share, which at full capacity, would lead to remittances of annual taxes in excess of Ksh10 billion and would create more direct and indirect employment for thousands of Kenyans.
As in other parts of the world, economic development in manufacturing and other business ventures, Kenya is not devoid of tax disputes between the taxing authority and tax payers. Tax disputes are a normal feature of tax administration, globally. However, Keroche and KRA’s tax dispute has spanned over a decade and a half and has grown into a subject of sharply divided public opinion.
So what has made the Keroche vs KRA tax disputes become almost toxic and a subject that has severely divided public opinion in Kenya?
Reclassification of Existing Products to Higher Tax Brackets & Backdating of uncollected Tax by KRA
At inception, through a letter dated 4th June 1997, KRA gave Keroche’s Viena Fortified wine a classification under Harmonized System (HS) Code Tariff 22.04 attracting 45% as the excise duty. This classification was reconfirmed by KRA to Keroche through a letter dated 27th April 1998.
The cost-friendly and high-quality Viena Fortified Wine brought more Kenyans into the drinking tax bracket. KRA’s tax collections from Keroche surged, tax relations between the Keroche and KRA were amicable and by June 2006, KRA was due to remit to Keroche a tax refund of Ksh84 million.
Shockingly on 23rd Oct 2006 , KRA wrote to Keroche stating it had made a mistake by classifying Viena Fortified Wine under HS Code Tariff 22.04 attracting 45% as the excise duty, and that KRA had decided to re-classify the product in a higher HS Code Tariff 22.06, attracting excise duty at the rate of 60%. The tax rate on Viena Fortified Wine was disrupted.
By Business today