Over 400 employees are on the verge of losing their jobs following the closure of Keroche Breweries by the Kenya Revenue Authority (KRA), the firm's CEO Tabitha Karanja has revealed.
In a statement on Monday, June 20, 2022, Karanja said the management has resolved to send the workers home due to a prolonged dispute with the tax man over arrears running into hundreds of millions.
The decision will be communicated to the affected members of staff later today as the firm plans to pour alcohol worth over Ksh500 million.
Karanja dismissed claims by KRA that Keroche is a non-compliant taxpayer, insisting that the firm is doing its best to honour its tax obligations under the current economic hardships occasioned by the Covid-19 pandemic.
"I wish to dispel the narrative that has been created by Kenya Revenue Authority (KRA) that Keroche Breweries Ltd is a non-compliant taxpayer who perpetually defaults on their tax obligations. The truth of the matter is that there have been tax disputes dating back to 2002 and the company in exercising its constitutional right to fair taxation should not be blacklisted," Karanja said.
"...I was thinking aloud on Sunday afternoon and pondering how I will relay the painful message to our employees on Monday that we will be laying them off as a result of KRA's closure.
"It is worth noting that Keroche Breweries earned monthly revenues of between Ksh400 million and 500 million pre-Covid-19. After the prolonged closure, the revenues dropped to below Ksh50 million. During the two years of Covid-19 pandemic, the company ensured that the livelihood of its employees was sustained which really strained its resources. The post-Covid effects and the on and off closures of the company’s factory by KRA have left the company a shadow of the pre-Covid establishment."
She praised the two leading presidential candidates, William Ruto and Raila Odinga, for condemning the recent closure of the firm despite the politics of the day pitting the former's Kenya Kwanza alliance and the latter's Azimio la Umoja - One Kenya coalition.
"We note with appreciation that this weighty business matter facing Keroche Breweries has been separated from politics and its sideshows," she added.
While accusing KRA of punitive tax laws last week, Raila said the government should be at the forefront of creating an enabling environment for the private sector to thrive.
"The private sector is the engine for economic growth worldwide. Therefore our government need to create an enabling environment for the private sector to thrive," Raila said.
"You do that by removing restrictive laws, removing bureaucratic red tape so that the private sector can be able to move and create wealth. It's not right to become very punitive in terms of taxation. If taxes are just too high there is a tendency to evade them. If they are low and manageable people will pay. So what you need to do is spread the net."
Karanja called on the relevant ministries including Labour, Industrialization and National Treasury to address issues affecting the private sector before things get out of hand.
"The company is on the verge of laying off over 400 employees due to the illegal, punitive and draconian actions by the KRA. The Ministry (Labour) ought to be concerned and interrogate the matter as it is constitutionally mandated to safeguard the welfare of labour and legally obligated to protect all Kenyan workers," she added.
The Ministry of Industrialisation and Enterprise Development, Karanja noted, should at all-time defend local investments and enterprises, and take all lawful measures to support them to develop and grow.
"Does the Ministry understand how long it takes to build an enterprise even half the size of Keroche Breweries? They should not and cannot sit put and watch existing Industries being brought to their knees by the very government agencies that are meant to facilitate growth. This will surely erode investors’ confidence in our country," the CEO quipped.
She asked Treasury Cabinet Secretary Ukur Yatani to take time to understand the standoff between KRA and Keroche.
"KRA have exerted their authority with cavalier approach on collection of taxes recklessly disregarding the effects of their actions, thereby 'killing the goose that lays the golden egg'. It is good to note that as KRA is applying the Excise duty Act to close down Keroche Breweries, the excise duty arrears amount to only about Ksh195 million, of which we defaulted on only one (1) instalment of Ksh30 million for April 2022," she said.
"We would like to clarify that the payment plan for tax in arrears signed between KRA and the company included an amount of Kshs.500 million goodwill payment proposed by the company on historical hypothetical taxes.
"This was to facilitate conclusion of matters settled out of court and create a conducive working platform for the company. The company had however requested for a moratorium of 6 months before commencing payments because of post-Covid effects that were aggravated by several closures of the factory between December 2021 to date and Agency Notices issued to the Banks."
She maintained that the company still needs the moratorium in order to have a head start and for reorganisation of the finances both internally and externally for its operations and for payment of taxes going forward.
"It is my humble request that all the relevant authorities be requested to rise to the occasion in order to amicably resolve the current issue and further protect and create a conducive and enabling environment even for other industries that may be suffering in silence," Karanja added.
KRA shuts down Keroche
KRA shut down the Naivasha-based brewer in May for reneging on the tax agreement on the settlement of arrears totalling Ksh300 million.
KRA and Keroche have been in a 16-year-long tax dispute resonating around the classification of the brewer's products, leading to two agreements between the two parties, in July and December 2021.