Keroche Breweries CEO Tabitha Karanja is now accusing Director of Public Prosecutions (DPP) of being used by competitors to stifle Keroche business through mudslinging.
Kahawa Tungu learns that KRA summoned all Keroche directors for a ‘hearing’ in its Upperhill offices early this month, where only Ms Karanja attended the hearing. However, according to the CEO, the ‘hearing’ turned out to be a humiliation which she left after three hours following the ‘disrespectful and humiliating’ ordeal.
She left after receiving intel from junior Kenya Revenue Authority (KRA) officials that their seniors were planning her “detention and arrest.” Two weeks later, the DPP has ordered her arrest and prosecution.
“The 3 hours included an attempted cross examination – without any documentation – on allegations of tax evasion by several officers who did not identify themselves. The summoning officer – The Commissioner, I & E did not attend and his implied representative, a Dr Karanja, without introducing himself to us, only made a 5 minutes appearance during the 3 hour ordeal,” she narrated.
“The same Dr Karanja, using handwritten pieces of paper, attempted to extract a statement from me, an act that was rebuffed. In between the sessions, 15 different officers in pairs of two to three, presented themselves in a manner that suggested the session was ad hoc and was being controlled and managed by someone or persons who are running an unofficial operation within the KRA. It was a bizarre and shameful exercise that only ended when I made a decision to disengage from what was obviously an unofficial kangaroo court convened to intimidate and embarrass me. To make matters worse, a futile order, was given to the security agents as I left to prevent my departure that they intelligently rejected in spite of intimidation.”
In alternate statements one from herself and another from the company, Ms Karanja says that despite Haji issuing a prosecution order through the media, she is yet to get an official communication from the office of the DPP, raising eyebrows.
“As a company that has legally operated for the last 22 years, it has been our understanding in law and practice that any questions and issues raised the Kenya Revenue Authority are arbitrated through a legal process that has never involved the highhanded drama that is focused on harassing, humiliating, and stopping or sabotaging company operations,” said Ms Karanja in a statement.
She also revealed that the matter involved company’s Viena Ice ready to drink vodka introduced in the market in July 2007, which is a matter that is ongoing at the tax appeals tribunal.
” It’s a surprise Mr Noordin Haji claiming that Keroche Breweries is involved with a tax fraud amounting to a colossal Ksh14 billion; a figure that is baseless and without facts. The DPPs office must not be misled and needs get his facts right about this matter. The deployment of unnecessary force, communicating to a corporate entity through social media, and the deliberate publishing of false information to defame and destroy the reputation of a Kenyan company reeks of sabotage and not due process. Having a dispute with KRA does not constitute a criminal offence,” she says.
According to a letter from KRA to Keroche in our possession dated July 22, 2015, KRA recommended that the tax dispute be “addressed from a policy perspective through engagement of the National Treasury and Parliament”. This followed a disagreement between the two on the computation of tax on Keroche’s Viena Ice.
KRA used section 117 (1) (d) and the Fifth Schedule of the Customs and Excise Act Cap 472 to compute the taxes, which specifies that the excise duty for spirits is on the higher of Ksh120 per litre or 35 percent the ex-factory selling price.
However, Keroche said that since Viena which has 312ml of distilled water and 188ml of Crescent Vodka for a 500ml package should not be taxed as a whole, but only the 188ml of vodka should be taxed.
“Viena Ice is packaged in quantities of 500 ml in which the ratio of water to vodka is 312ml of naturally distilled water and 188ml of Crescent Vodka. As a result of being produced from an excisable product, Viena Ice is entitled to an excise rebate under section 149A of the Customs and Excise Act CAP 472 of the excise duty previously paid,” argued Keroche in appeal document is our possession.
The dispute started in 2014, with KRA demanding a backdated to 2007 for the 312ml water to attract Ksh94.9, translating to paying more tax than what is charged on any other alcoholic beverage.
“We have religiously remitted taxes on a monthly basis for the last nine years based 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,” Keroche said on August 13 in a letter to KRA commissioner general, a week before the prosecution order was issued by the DPP.
Following the dispute, KRA directed that Keroche change the formulation of their Viena Ice Ready to Drink vodka from 13.5 percent v/v (vodka concentration) to 10 percent v/v, which the company says has drastically affected the sales of the product with by 50 percent drop.
Ms Karanja in the company statement issued today, Ms Tabitha says that since the matter is still under the Tax Appeals Tribunal (TAT), the DPP should not have initiated another court battle until the matter is determined at TAT.
“As we await the outcome of the Tax Appeals Tribunal (TAT), deploying methods that appear to intimidate a party in a mediation process, prejudices and undermines an established practice that has guided all stakeholders through the years,” adds Ms Karanja.
Ms Karanja now wants the DPP to shelve his case, until the matter under TAT is fully heard and determined.
In a statement today, KRA however dismissed claims that it is fighting individuals in the fight against tax evasion.
“Kenyans should reject the narrative that KRA is fighting any individual or business. On the contrary, KRA has the additional responsibility of trade facilitation under which we support a business environment that is conducive for growth of business, which further results in increased taxes,” said KRA commissioner general James Mburu in the statement.
Mburu said that the taxman is targeting individuals who fail to disclose fully the income they have earned, mis-statement of expenses to reduce the taxable income and therefore evade taxes, failure to pay the correct import taxes through concealment of goods, misdeclarations and undervaluation and failure to withhold and remit taxes as required by law.
KRA also said that it is weeding out its officials who have been aiding tax evasion.
“We have set up mechanisms for identifying and investigating staff who aid tax evasion and we are subjecting them to our internal disciplinary processes. We are also working with other law enforcement agencies in ensuring that those of our staff who aid tax evasion are prosecuted jointly with the taxpayers they have aided.” added Mburu.
KRA however remained silent on the Keroche issue.