Keroche faces cash crunch as it defaults on tax repayment plan

Keroche faces cash crunch as it defaults on tax repayment plan

The cash crisis facing Kenya's second largest brewery Keroche Breweries has deepened after it defaulted on a tax repayment plan and ran into salary arrears by more than two months.

The matter was resolved quickly during the festive season after the KRA shut down the Naivasha-based brewer in December.

KRA officials were back to ruining the brewer last week after it defaulted on an earlier agreed tax repayment plan in the latest chapter of its long-running battle with the taxman.

The cash flow challenges caused the two-month salary delay, but the management team promised to work around the clock to settle employees dues, according to Tabitha Karanja.

She dismissed claims made by some of her employees that the salary arrears were now running into six months.

She said the firm had yet to recover fully from the effects of the Covid 19 pandemic, three months after the containment measures were lifted, and it had to re-egotiate its payment plan with the taxman last week before it could continue with its operations.

The ripple effect of the disease has resulted in arrears of Sh 270 million, said Mrs Karanja in an interview at her office.

Before Covid 19 hit us hard, we were able to pay the Sh 200 million tax comfortably, but we had a slight delay in settling the outstanding amount. Karanja, who has since announced that she is running for the Senate, said the KRA has been more understanding of the plight of the alcohol industry after they agreed on a new payment plan.

The firm has opted for alternative dispute resolution ADR in its tax dispute with the KRA.

She said before the current agreement, the firm had been closed for at least two weeks by the taxman, but full operations had resumed.

She said that we are hoping to continue honouring our tax obligations going forward as things are now looking up.

She said that we will continue to pay taxes because we have weathered the storm and with the goodwill of the KRA.

Keroche has been on an expansion programme for the past few months, introducing two brands as it seeks to increase its market share.

It recently launched the Viena Ice Strong Lager with an alcoholic content of 10 per cent targeting all levels of consumers.

Brand X was unveiled by the beer maker, with an 8.8 per cent alcoholic content.

The brewer has been reengineering operations and executing a cost-cutting strategy to stay afloat since the beginning of the year.

At the peak of the epidemic, the firm scaled down its operations, retaining staff that offered critical services such as maintenance.

Some of the employees were sent on unpaid leave, while others had their stay-home period extended.

Keroche has a capacity of producing 30 different brands and is looking at more than 20 per cent of the market share.

The company's growth has been steady since its inception 18 years ago.

The taxman has been in the spotlight in recent years after the new Commissioner-General Githii Mburu trained his guns on the alcohol industry in order to seal tax leakages in the sector.

London Distillers Kenya are among the targets of the KRA s tax crackdown, whose directors are battling tax evasion-related charges in court for claims totalling more than 2 billion. The taxman is embroiled in a bitter fight with Mount Kenya Breweries over tax evasion claims.

Tax evasion in the alcoholic businesses is estimated to cost the country at least 10 billion dollars annually in unpaid taxes.

Keroche has been in and out of court with the taxman over a 9.1 billion tax dispute.

The taxman was stopped from attaching its accounts on condition that it pay 500 million, pending appeal by the brewer. The firm filed another appeal saying it could not raise the amount.

The KRA said it had extended an olive branch to the company, including entering an alternative dispute agreement or a payment proposal, but the brewer reneged. The matter is now being handled out of court.