Kenya’s Keroche Breweries trapped in US$140m tax fraud allegations

KENYA – Kenya’s second largest brewer, Keroche Breweries is facing inquiry for allegedly evading tax amounting to US$140 million (Ksh14.4 billion) between January 2015 and June 2019.

This is according to investigations by the Kenya Revenue Authority (KRA) and the office of the Director of Public Prosecutions, led by Noordin Haji.

The DPP said the Kenya Revenue Authority (KRA) commissioner-general submitted an inquiry file to his office on August 18 and an audit by KRA established that Keroche Breweries had evaded payment of tax amounting to Ksh14,451,836,375 (US$140 million).

The due Value Added Tax (VAT) was forfeited on brands including; stamps allocated Crescent Vodka, Quantity and rate Variances on the Vienna Ice and summit beers totaling to Ksh12 billion (US$116m).

In a statement to newsrooms, the DPP said investigations maintained that there is sufficient evidence and that it is in the public interest to charge the company’s management due to breaching the Tax Procedures Act of 2015.

The DPP has hence ordered the arrest of Keroche Breweries Chief Executive Officer Tabitha Karanja and Joseph Karanja, who is also a director at the alcohol manufacturer.

However, Keroche has refuted the allegations claiming that it has been complying with the provisions of Tax Procedures Act.

In a statement, the chief executive noted that the company only holds an unresolved dispute with the taxman on the Viena Ice ready to drink Vodka “which is a matter hat is ongoing at the tax appeal tribunal.”  

Meanwhile, businessman Humphrey Kariuki, who has ownership in Africa Spirits Ltd and WoW Beverages in Thika, has also been apprehended over tax evasion and fraud amounting to more than Sh41 billion (US$39.84m).

Early this year, Africa Spirit, which manufacturers Glen Rock, Legend Black, Blue Moon, Legend Brandy, Gypsy King and Furaha, was closed down to facilitate investigations after a suspected 312,000 litres of illicit ethanol was also found within facility.

Investigations further revealed that the premise was in illegal possession of 21 million counterfeit excise stamps, worth Sh1.2 billion (US$11.66m).

The government said that the move to close the facility was part of the its ongoing campaign against illicit trade aimed at ensuring compliance with tax and consumer protection laws.

Amidst the recent tax offenses, the government recently announced that it will be imposing an additional 15 percent excise hike on wines and spirits in this year’s budget.

Arguably, Kenya levies heavy tax on ethanol, making it one of the leading products to be smuggled across other East African countries, with the taxation on the product remaining unharmonised.

Kenya Breweries Communications Relations Director Eric Kiniti told the Sunday Nation that the raw material taxation added to the in-factory compliance where beer manufacturers pay Sh1.50 for every stamp while each bottle of spirit is affixed with a Sh2.980 stamp has encouraged the tax evasion.

“The cost of compliance is so high that they find it easier to operate outside the radar, this is the elephant in the room. The other alternative is to ensure the KRA can enforce full compliance to level the playing field and avoid having many more players to opt for the illicit route,” said Mr Kiniti

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