It is very sad that the Commissioner General of the Kenya Revenue Authority, a man I respect very much, has personalized the dispute between KRA and Keroche.
It is good to note that over the years, we have had a cordial relationship with KRA and we are in the category of large taxpayers since 2004.
It is critical that we maintain this good relationship at all times because this dispute that threatens our good relationship if left to escalate will erode the much-needed investor confidence in our country.
Keroche Breweries is a Private manufacturing Company with a nationwide footprint, but since the Commissioner General has lied to the public that Keroche owes tax arrears of Kshs. 22 Billion, I find that it is necessary to use this early opportunity to set out the correct facts and figures and make the issue clear to the public.
Keroche signed an agreement with KRA on 15th March 2022 to pay an amount Kshs.956 Million broken down as follows;
1). Kshs.500 Million- Being goodwill payment proposed by the company on historical hypothetical taxes for the period between 2002 and 2014.
This was to facilitate conclusion of matters settled out of court and create a conducive working platform for the company. The agreement was signed on 21st December 2021 and it is good to note that the amounts agreed during ADR were meant to be paid over a period and not immediately since these were amounts that were neither actually charged nor collected.
This being a goodwill gesture, the company proposed a 60-month payment period but this was rejected.
2). Kshs.134 Million-Signed on 23rd July 2021 from historical tax disputes for the period 2012 and 2013 that were resolved in ADR negotiations.
3). Current taxes of Kshs.322 Million as follows:
a) Kshs.195 Million as excise duty.
b) Kshs. 78 Million as Corporate tax.
c) Kshs. 49Million as VAT.
These amounts were accrued due to the adverse economic impact of covid-19 economic on the business for the period between Feb 2021 and December 2021.
It is good to note that KRA has enforced the Excise Tax Act (Cap 472) to collect the amount of Kshs. 195Million solely with a view to effecting closure of Keroche Breweries.
It has become clear over time that the closure of Keroche Breweries is more important than recovering due arrears.
The other amount of Kshs.78 Million (corporate tax) was to be paid by end of June 2020 but due to a drastic drop in sales, we could not raise the amount.
Our Sales dropped from Kshs.500Million to below Kshs.100 Million per month. The Excise and VAT amounts arose due to prolonged closure of bars as a result of measures taken by the Government to control spread of the 2020 pandemic which heavily affected bars, hotels and other service industries.
Fortunately, the signing of this agreement saw KRA re-open our plant on 16th March 2022 which unfortunately only lasted until 15th May.
Mr. Commissioner General,
As you are aware that after negotiating under tremendous pressure with a large team of your commissioners and top officers, we were compelled to enter an agreement whose implementation, on the face of it, could not be supported by the company’s performance in its immediate post-pandemic economic effects and enforced 4-month closures by KRA.
Our pleas for time to resume payment on attaining full operational performance were rejected, but the KRA team noted our concerns, promised that we would walk the recovery journey together, and invited us to raise any concerns, issues or difficulty with them as soon as they arise to enable them support us to get back to our initial position.
We raised this in our correspondences of 27th April 2022 and 6th May 2022 with your officers, informing them that we could not be able to meet our financial obligations to KRA on our tax arrears since one month was not sufficient time to bring back the brewery to operations and begin making payments on our arrears as we mentioned during our negotiations.
Unfortunately, KRA took enforcement action on 15th May, 2022, without any prior notice, and closed down the brewery.
Mr. Commissioner General,
From a business perspective, you can never expect a company to come back to its feet within a month after being closed for 19 months due to effects of the pandemic, experience closures by KRA five times within six months with issuance of agency notice to all banks in Kenya three times within that period.
Hence the reason for our humble request to KRA to re-open the brewery, give a 6-Month Moratorium and lift all agency notices issued to the banks.
My question to you, from a layman’s perspective is this: how would you expect the company to pay taxes when you have closed its operations through switching off our packaging lines, sealing off our finished goods and raw materials stores and issuing agency notices to all our banks?
Why is KRA taking advantage of the situation? When you are given an office like the one Commissioner General has, you are expected to act like a parent and treat all your children equally.
Keroche is one of your children and you must treat it fairly. Truth be told, I don’t understand how a whole Government would close a company that was contributing Kshs. 200Million just because of defaulting on Kshs. 30Million initial installment.
I believe it is a mere excuse. How can the top respected leadership in this country including His Excellency the Deputy President, Hon. Dr. William Ruto and the Right Hon. Prime Minister Hon. Raila Odinga request KRA to re-open the brewery for the sake of employees but instead, the Commissioner General goes public and vows not to open the company?
As a matter of ordinary prudence, Keroche Breweries being a local indigenous enterprise, should compel you to go out of your way and see to it that it bounces back to its feet, just as is done in other parts of the world where employers receive extra-ordinary state support to protect jobs and industrial competitiveness.
KRA instead is held-bent on shutting down the few businesses that have withstood incredible recent difficulties.
Owing Kenya Government money cannot and should never be criminalized. You cannot punish over 400 direct employees and thousands of other indirect including farmers (of barley, Sorghum, sugarcane), distributors, retailers and suppliers who depend on Keroche Breweries for their livelihoods on the pretext that the company has defaulted on Kshs. 30Million initial installment owing to perfectly understandable reasons.
You cannot punish innocent consumers whose demand for their favorite brands in the bars -including Summit Lager, KB Lager ,Summit Malt, X- Double strength beer, Viena Ice Strong Lager, our Valley Wines, our Whiskies, Brandies ,Vodkas and Gins- will remain unmet, and who are now forced to consume alternative beverages from competing brands entirely against their wish, just because the company has defaulted on a Kshs. 30 Million initial installment.
We will not reopen Keroche Breweries, KRA declares
Mr. Commissioner General,
You may ignore everything else that I have submitted to you, but hear the cry of the 400 plus employees who weep every night with their families, after receiving a Memo by the HR yesterday informing them that if the company is not re-opened by 30th June 2022 the company will be forced to send then on unpaid leave.
These diligent workers marched under scorching sun for 10 Kilometers to Naivasha town to seek support from the Kenyan Government through the Labour Office not knowing that this Office has no power to save their situation.
They confessed to the Media that they are affected psychologically and owing to the unbearable anxiety the situation is exposing them to.
Mr. Commissioner General,
Defaulting on one-month installment of Kshs 30Million should not be an excuse for you to torment innocent employees who earn as little as Kshs. 20,000 per month, but are still able to support their families with basic needs and live a life of dignity.
Owing to your punitive and inconsiderate measure, they are now reduced to hardship and destitution.
We should fear being haunted by the agonised tears of these hardworking Kenyans who are suffering for something that can be easily resolved amicably to the mutual benefit of all stakeholders.
Mr. Commissioner General,
I know you have never visited Keroche breweries, but your officers who have can attest that it’s a state-of-the-art brewery with 21st Century Technology installed with a guarantee of 50 years, meaning it’s a plant that can run for over 100 Years.
So, let’s NOT kill a goose that lays the golden eggs. A Company always has a Founder but normally he or she is not the main beneficiary but it is always for generations and Generations to come.
It is always an inspiration for upcoming entrepreneurs to see that it can be done. Kindly allow Keroche to grow and inspire future generations of industrialists, manufacturers and entrepreneurs.
MY REQUEST
Mr. Commissioner General,
I still plead with the KRA to afford us an opportunity to get back on our feet and regain our footing as a manufacturer, employer and a local indigenous business entity in order to sustainably meet all our obligations.
I specifically request once more to be given a moratorium on the enforcement action that shut down our operations, and on the unsustainable payment plan that we agreed to under unbearable pressure.
I therefore also humbly request for further engagement to consider a way for the company to meet its due obligations without sacrificing it and the livelihoods of countless Kenyan households.
I plead with you, for the sake of all the hundreds of innocent Kenyans whose livelihoods depend, directly and indirectly on this brewery, to allow us to re-open and resume full operations in order to keep them working and to enable us meet our obligations to them and to the KRA.
If we do not do this, hundreds of families will be reduced to poverty, suffering and begging in these extremely difficult economic times.
Please don’t go into history as the person who shut down local enterprises to the benefit of multinationals and enforcing a monopoly through the back door.