DPP orders arrest of Keroche bosses over Sh14b tax evasion

Thursday, August 22nd, 2019 00:00 |
Joseph Karanja, a director of Keroche Breweries Ltd and husband of chief executive Tabitha Karanja. Photo/PD/FILE

The Director of Public Prosecutions yesterday ordered the arrest of Keroche Breweries Limited chief executive Tabitha Karanja and her husband Joseph Karanja over Sh14 billion tax evasion.

In a press statement, Noordin Haji said he had approved the prosecution of the firm and its proprietors after perusing a file submitted to his office by the Kenya Revenue Authority (KRA) on tax fraud investigations between January 2015 and June 2019.  

Prosecution of the two directors of the Naivasha-based brewer will be the second high-ranking arraignment targeting alcoholic beverage manufacturers on tax fraud charges and comes just two days after Humphrey Kariuki, associated with Africa Spirits and Wow Beverages, was arrested and arraigned  over Sh41 billion tax evasion.

Giving the green light for  arrest of  the Karanjas, Haji said there was enough evidence to charge Keroche and its directors with evasion of more Sh12 billion Value Added Tax and Sh2 billion shillings worth of Excise Duty tax.

Humiliate company

“The audit by Kenya Revenue Authority established that Keroche Breweries Limited had evaded the payment of tax totalling Sh14,451,836,375,” read the DPP’s statement. 

“Therefore, having independently reviewed the file and applying the provisions of the National Prosecution Policy, I am satisfied that there is sufficient evidence, and that it is in public interest to charge the suspects listed herein below with 10 counts of  fraud contrary to section 97 (a) and (c) of the Tax Procedures Act, 2015.

Last evening, DCI detectives stormed Keroche premises in Naivasha to arrest the two but failed to find them. By the time of going to Press they had not been arrested.

The DPP accuses Keroche of evading paying tax on some of its popular brands including Crescent Vodka, Vienna Ice and Summit beer.

Avoid arrest

The brewer has previously been embroiled in tax disputes with KRA.  In 2017, Keroche won a 10-year court case against the revenue collector in which the taxman had demanded Sh1.1 billion in tax arrears.

Last evening, Tabitha sent a letter dated August 13 to newsrooms addressed to the newly appointed KRA Commissioner General Githi Mburu highlighting outstanding tax disputes and arrears back-dated to 2010.

She cited summons to appear before senior KRA officials on August 9, who she claimed were out to intimidate, harass and humiliate the company.

“The happenings last week go beyond any known measures that have been witnessed since the much-condemned practices of 2003 – 2009 when KRA was viewed by the public and media as unsupportive of Keroche Breweries as the largest indigenous brewing company in Kenya,” she wrote.

She said during the meeting she was “handled and subjected to the most disrespectful and humiliating manners for a period of three hours”.

“I opted to leave your offices when your own officers, embarrassed by the on goings, advised me to quickly leave to avoid an “impending detention” and “arrest” that was being schemed by their superiors,” she wrote.

In 2015 the court stopped KRA from closing down Keroche industries over misrepresenting its duty rate while filing tax returns.

Keroche Breweries was established in 1997, as Keroche Industries, operating from the home town of Tabitha and Joseph in Naivasha. 

It is widely touted as a local company that has excelled in the local alcoholic drinks industry, a sector dominated by giant multinationals such as Diageo and is the second largest brewer in Kenya after East African Breweries Ltd (EABL), producing popular alcohol brands such as Summit Lager and Summit Malt. 

Rise to the top

It is considered the main competitor to EABL, majority owned by Diageo, after Castle Brewing Limited of South Africa left the country in 2002.

Its brands target mostly middle level and low and low income earners, a market segment that had for long been neglected by other brewers and was at the time of inception served mostly by illicit brewers.

In its rise to the top Keroche has had to deal with several challenges including claims of producing unhealthy drinks and lengthy court cases. 

Earlier this month, KRA said it was targeting 600 individuals over tax evasion. 

“Last year we took to court 222 individuals, this year we have shifted our focus completely, we want to prosecute 600 individuals. We have shifted focus in 2019 and have watertight cases targeting up to 600 individuals, these are cases which are properly investigated and we are sure that we will get over 94 per cent success rate,” KRA said. 

KRA recovered Sh12.6 billion from 210 evasion cases following the prosecution of 222 individuals. 

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