The Kenya Revenue Authority (KRA) has expressed its willingness to resolve the Sh14.5 billion tax evasion case involving Keroche founders Joseph and Tabitha Karanja out of court.
It has now emerged that the two parties have entered into negotiations to settle the matter outside the courtroom, prompting the KRA to seek an adjournment from the court to finalise the settlement.
On Monday, the tax authority informed Trial Magistrate Geoffrey Onsarigo that it was considering dropping the high-profile case against the Nakuru Senator and her husband, as negotiations were ongoing.
Duncan Ondimu from the Office of the Directorate of Public Prosecutions (ODPP) confirmed that he was aware of the discussions and urged the parties to conclude the settlement promptly.
The case did not proceed to hearing due to the reported illness of the Karanjas’ lawyer.
The magistrate granted the request and postponed the case until 18 September 2024 to allow time for the settlement negotiations.
Mrs Karanja, who resigned as CEO of Keroche Breweries in June this year after a 25-year tenure, faces ten tax evasion charges.
She left behind a company caught up in a liquidation suit and grappling with a protracted tax dispute with the Kenya Revenue Authority (KRA).
The dispute began in October 2006 when Keroche challenged KRA’s decision to reclassify its fortified wine products under Harmonised System Code Tariff heading 22.04, rather than 22.06, for sales and trading activities from 2002 to 2006.
This reclassification led to a tax assessment by KRA amounting to Sh1.1 billion against Keroche, which included Sh802.9 million for income tax, excise duty, and withholding tax, and Sh305.1 million for Value Added Tax, interest and penalties.
Keroche has been engaged in ongoing litigation over these tax claims.
On 16 March 2022, both parties reached a settlement agreement, which included a payment plan to address Sh957 million in undisputed tax arrears. This agreement also led to removing agency notices that had previously frozen the company’s bank accounts and halted its operations.
- Keroche’s assets to be sold to settle claim of wrongful dismissal
- Mobius Kenya shuts down amid piling debt and intense tax battle
Mrs Karanja later said that she signed the deal with the taxman, which she subsequently breached, under duress. She explained that it was impossible to pay such a large sum just a few weeks after the company had reopened for operations.
“We were actually forced to sign the document after sitting in a government office for close to six hours without tea or even a glass of water,” Ms Karanja said in June 2022, reacting to KRA’s assertion that the factory would remain closed until Keroche honoured its end of the bargain.
“The pressure in the room was palpable. You could hear a pin drop. The commissioners present told us explicitly that they were under pressure but could not disclose from whom,” she added.
Mrs Karanja revealed that before the taxman allowed the factory to reopen, she had to pay Sh21 million. “The account had only Sh15 million, so we borrowed an additional six million.”
She explained that the agreement required them to pay Sh30 million within a month of resuming operations, but they found it nearly impossible to do so. Later, they received a letter from KRA warning them of potential repercussions for failing to meet their financial obligations.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
