Business

Keroche blames KRA’s errors for tax disputes

Thursday, March 10th, 2022 02:01 | By
Keroche Breweries proprietors Joseph and Tabitha Karanja in a past court appearance over tax evasion claims. Photo/PD/File

Keroche Breweries said that Kenya Revenue Authority’s (KRA) demand of Sh9.1 billion in total taxes was the taxman’s error for reclassification of the company’s products in higher tax brackets and backdating of uncollected tax.

In its latest battle with KRA, the Naivasha-based brewer said re-classification of the company’s Viena Fortified wine to a higher tariff attracting 60 per cent excise duty led to Sh1.1 billion difference, an amount it pointed out was never collected since it had sold the products using the previous 40 per cent rate. “Shockingly on 23rd Oct 2006, KRA wrote to Keroche stating it had made a mistake by classifying Viena Fortified Wine under HS (Harmonised Systems) Code Tariff 22.04 attracting 45 per cent as the excise duty, and that KRA had decided to re-classify the product in a higher HS Code Tariff 22.6, attracting excise duty at the rate of 60 per cent,” the firm’s CEO Tabitha Karanja said in a statement yesterday.

“KRA had backdated the new HS Code Tariff 22.6 for five years to recover their ‘error’ amounting to Sh1.1 billion (the difference between the initial HS code tariff 22.04 and the new HS Code Tariff 22.06) with full knowledge Keroche had never collected this money from the public,” the stament added.The Sh1.1 billion is part of the Sh9.1 billion, which, according to the brewer, was backdated by KRA assessment.

Excise rate

The remaining Sh7.9 billion tax arrears is linked to the Vienna Ice Vodka that KRA classified under the 60 per cent excise rate because the liquor amounts to manufacture by diluting Crescent Vodka. Keroche, however, considered Vienna Ice Vodka as a ready-to-drink vodka that should be subjected to a lower rate. The taxman argued otherwise, saying its production process attracts a higher rate of 60 per cent, and used the same basis during computations that were backdated for three years.

“Seven years later, on 20th August 2014, Keroche Breweries received communication from KRA disputing our formula of the Viena Ice ready-to-drink,” Keroche said.

                        

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