KRA insists on collecting Sh9 billion from Keroche as tax dispute escalates

Chairman of Keroche Industries board of director Joseph Muigai Karanja and the company's CEO Tabitha Karanja at Milimani law courts

The taxman wants the High Court to lift orders barring it from demanding Sh9.1 billion in taxes from Keroche Breweries.

In a response to the suit filed by Keroche challenging the Tax Appeals Tribunal decision, Kenya Revenue Authority (KRA) through an affidavit sworn by one Francis Muruiri, claims that it should be allowed to collect the tax.

“The company should know that once the tribunal ruled in our favour, they have no option but to pay. In the principle of equity, we should be allowed to enjoy the fruits of the judgement since the matter has been pending for many years,” swore Mr Muruiri.

KRA denied claims that it acted in bad faith with the speed it moved to enforce the decision.

It has argued that issuing Keroche notices on March 11 after the tax tribunal gave its ruling was not irrational and unfair. It was an exercise within its powers to recover the disputed amount.

KRA has also denied claims that it discriminated Keroche while classifying its products, stating that it has always enforced decisions made against all taxpayers without segregation.

According to Muruiri who is KRA’s chief manager for large taxpayers’ office, Keroche should not act as a victim in these circumstances.

It should blame itself for failing to have its products classified under the correct tax tariff.

Whereas Keroche is claiming that the disputed tax totals Sh7.2 billion, KRA said Sh9.1 billion is the right figure.

The taxman added that the company should not feign ignorance of the correct amount when records of calculated amounts were presented before the tribunal.

Muruiri also denied claims that KRA is out to kill Keroche Breweries. He said that KRA’s intention is not to scuttle the business by scaring Keroche’s customers but to enforce tax payments.

“They should be forthright and face the reality that taxation is here to stay and no individual or enterprise can avoid shouldering the burden with the rest of the citizenry, and that none will be treated differently from the process,” he said.

He added that instead of accusing the tribunal of being unfair, the company should have put in place a contingency plan to address the negative outcome and payment proposal to avert the stalemate.

Muruiri claimed that it is in the interest of Keroche Breweries to pay the taxes as ordered by the tribunal since the amount continues to accumulate penalties and interest.

He noted that KRA is not opposed to the company making proposals on how to settle the amount in instalments.

Muiruri insisted that the authority has been experiencing problems in effectively assessing, collecting and accounting for all tax revenues due to frustrations from certain corporations resulting to substantive losses of government revenue.

On claims that Vienna Ice ready-to-drink vodka was a distinct product that should not attract tax for water used to dilute it, KRA maintained that the taxes should be based on the volumes produced and not on the different mixtures used to produce it.

“We stand with the tribunal’s findings that the company was involved in compounding of spirit which amounts to manufacture and as such Vienna Ice was a distinct product for which Excise Duty and Value Added Tax were payable,” said Muruiri.

On the issue of backdating tax and reclassifying the tax tariff for Vienna Fortified Wine from HS Code 22.04 to HS Code 22.06, KRA argued that it is justified to demand the additional tax since the product was a mixture of fermented pineapple and alcohol which attracted higher tax. KRA wants row resolved through Alternative Dispute Resolution.