KRA Freezes Keroche Breweries Bank Accounts as it Seeks to Recover Sh9 Billion in Unpaid Taxes

The tax dispute pitting Kenya Revenue Authority (KRA) against Keroche Breweries Limited has taken a new twist. This comes after KRA reportedly froze the brewer’s bank accounts in an attempt to recover unpaid taxes totaling Sh9 billion.

Keroche Breweries CEO Tabitha Karanja on Thursday said KRA issued a notice to banks instructing them to recover the money from the company’s accounts.

“Today morning, we woke up to an agency notice issued by KRA directed to our banks to collect Ksh.9 billion. This means Keroche Breweries cannot withdraw any money or transact any business from their accounts until KRA collects the alleged Ksh.9 billion. In short, as we speak, they have halted all our operations,” Mrs. Karanja said in a statement.

KRA’s move came two days after Keroche lost a case filed before the Tax Appeals Tribunal with the arbitrator ordering the beer maker to pay Sh9,116,835,985 in taxes. Keroche has since appealed the decision at the High Court.

Mrs. Karanja said KRA’s decision to freeze the company’s accounts amounts to misuse of power as the matter is still before the court.

“This is absolute misuse of power that we the people have bestowed on KRA. They have lied to the public that we owe them Ksh.9 billion. They know very well; the legal process in this matter has just began. Immediately the Tax Appeals Tribunal made a decision, we have 30 days to appeal. The tribunal made its decision 2 days ago, March 9, 2020,” she said.

The tax dispute between KRA and Keroche arises from the manufacturing process of Viena Ice vodka and classification of pineapple-based wines.

Keroche argues that Viena Ice vodka is not a separate product from Crescent vodka since it is made by diluting Crescent vodka. The brewer says this process does not amount to manufacturing.

“Mixing vodka and water does not result in the creation of a new product. Excise Duty, is, therefore, only payable when a new good is manufactured in Kenya,” says Keroche.

But in a ruling on Monday, the Tribunal said: “Keroche Breweries Limited was involved in the compounding of spirit which amounts to manufacture within the meaning in Excise Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed)as such Viena Ice was a distinct product for which Excise Duty was payable.”

Keroche termed the verdict by the Tribunal as “retrogressive and anti-entrepreneurship”, adding that it is aimed at killing Kenyan innovations.

“The decision by the Tax Appeals Tribunal refusing to recognize that our innovation to dilute our vodka with distilled water for more moderate drinking should not be subjected to punitive taxation,” said the brewer.

“This means that all water added to our vodka to make a ready drink vodka and consumed to date – backdated for the last eight years – now attracts Ksh.243.00 per liter. The decision to tax the water added to our vodka at the above rate makes this the most expensive water in the world.”