KRA freezes Keroche Breweries accounts to recover Ksh.9B in taxes

The Kenya Revenue Authority (KRA) has now frozen bank accounts of Keroche Breweries Limited in a bid to recover alleged taxes amounting to Ksh.9 billion.

Addressing the media on Thursday, Keroche Breweries CEO Tabitha Karanja said a notice has already been sent out to banks holding their accounts, instructing them to recover the money.

“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,” said the Keroche boss in a statement.

Keroche Breweries was ordered to pay Ksh.9,116,835,985 after losing a case filed before the Tax Appeals Tribunal, forcing the alcoholic beverages manufacturer to move to the High Court to challenge the decision.

Ms. Karanja termed the move by KRA to freeze their accounts as a misuse of power, noting that 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,” said Keroche.

The case pitting the taxman against the brewer involved the contentious manufacturing process of the Viena Ice brand of vodka as well as the classification of pineapple-based wines.

Keroche argued that Viena Ice vodka was not a distinct product from Crescent vodka since it (Viena Ice) was produced by diluting Crescent vodka, hence the process did not amount to manufacture.

“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,” said the brewer.

However, the Tribunal, in a ruling delivered on Monday, 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of spirit which amounts to manufacture within the meaning in Excise Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed)as such Viena Ice was a distinct product for which Excise Duty was payable.”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, however, termed the Tribunal’s judgment as “retrogressive, anti-entrepreneurship” and only serving to stifle 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 litre. The decision to tax the water added to our vodka at the above rate makes this the most expensive water in the world.”