Keroche to appeal Sh9 billion tax ruling

By Zachary Ochuodho
Friday, March 13th, 2020
Keroche Breweries proprietors Joseph and Tabitha Karanja in court over tax evasion claims. The Tax Appeals Tribunal has given KRA the go ahead to collect Sh9.1 billion tax from Keroche. Photo/PD/File
In summary
    • The Tax Appeal Tribunal on March 9 gave green light to the Kenya Revenue Authority to collect Sh9.12 billion from Keroche Breweries in taxes.

Zachary Ochuodho @zachuodho

Keroche Breweries is set to move to the High Court to contest the Tax Appeals Tribunal’s (TAT) ruling on Monday allowing  the Kenya Revenue Authority to collect over Sh9 billion from the firm.

Keroche management said in a statement the company is dissatisfied with the decisions arrived at by the Tax Dispute Tribunal, and will seek a “fair hearing” in court.

“The decision by the TAT refusing to recognise that our innovation to dilute our vodka with distilled water for moderate drinking should not be subjected to punitive taxation,” the statement read in part.

The company termed the tribunal’s decision retrogressive, anti-entrepreneurship, adding that it stifles innovations without which the cause of Kenyan industrialisation would not suffice.

“This means that all water added to our vodka to make a ready-to-drink vodka and consumed to date — backdated for last eight years — now attracts Sh243.00 per litre.’’

Keroche said the ruling to tax the water added to its vodka at that rate ‘‘makes it the most expensive water in the world.’’

The breweries said it had two cases at the TAT, which were rendered on the same day.

The first ruling in regards to the tax rate for its Viena Ice Ready to Drink Vodka started in 2014, while in the second case emerged after TAT reversed a High Court ruling delivered in 2006 (14 years ago) which quashed a Sh1.2 billion tax claim by KRA against it.

However, it said although the court asked the two parties to first resolve the matter using the tribunal and only go to court if this failed, the action KRA has taken to issue misleading information necessitates them to move to court.

“It is a disgrace for an important public body such as KRA to mislead, actually lie to the media and the public, with an erroneous press statement titled “KRA wins case to collect more than Sh9 billion from Keroche Breweries,” the statement reads in part. 

Since 2014, Keroche Breweries has contested KRA’s tax valuation arguing that the taxman has been receiving its remittances since the inception of the product and took seven years to claim there was a confusion in the taxation rate.

Distilled water

“We have religiously remitted taxes on a monthly basis for the last nine years on the 188ml Crescent Vodka, which is what is in the 500ml Viena Ice Ready-to-Drink Vodka.

We have never charged nor collected any tax on the 312ml naturally distilled water added in the 500ml Viena ready to drink Vodka because this is not applicable,” the statement said.

It said mixing vodka and water does not result in the creation of a new product, the excise duty is, therefore, only payable when a new good is manufactured in Kenya.

The company said due to the ruling, “Our already existing vodka with water is now considered to be the manufacture of a new distinct excisable good.

Keroche Breweries’ product starts and ends with vodka and water. After these two components have been mixed, it still ends up with the exact same ingredients.” 

It said the tribunal’s second decision was an attempt to reverse a 14-year-old High Court judgment without adhering to the directions that were provided in the avenue for appeal “which is simply malicious and borders on a smear campaign.”

New information

“The High Court in allowing KRA to appeal the 2006 ruling that dismissed their Sh1.2 billion tax claim against Keroche Breweries asked the two parties to first try and resolve the matter through a tribunal on condition that KRA presents new information to advance their case,” the management said.

According to Keroche, no new information was provided and the management was shocked that the TAT accepted the same case and narrative that was dismissed by the High Court 14 years ago.

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