M-kopa was one of Kenya’s most well-funded fintech companies, having raised over $245 million in equity funding since its inception in 2011. M-Kopa started off retailing solar-powered electrical equipment on a pay-as-you-go arrangement and diversified into health insurance, as well as providing credit for purchases of other items including smart phones and electric motorcycles. It has a customer base of more than 3 million people in Kenya, Nigeria, Uganda and Ghana, and has provided over $1 billion of cumulative credit.
Piky Ponky
(Pictured)Jesse Moore is chief executive officer of М-Кора.
Already, with a bleak future looming on the horizon, Kenya Revenue Authority (KRA) is at war with M-Kopa over tax evasion related matters. And to cover up its tax evasion, M-Kopa is hiding under what it terms as being unable to collect Sh308.5 million it is owed by 47,625 clients they supplied lighting kits on credit across the country.
Sources well versed with the ongoings reveal that M-Kopa has inflated the list of debtors who happen to be less than 20,000. Inflated with over 27,000.
The idea is to put on an argument that customer debt is behind the current mess.
M-Kopa in its argument says it supplied lights, solar panels, multi-device chargers, pay-as-you-go sim cards on credit basis.
M-Kopa is facing KRA at Tax Appeals Tribunal. The firm wants billions of shillings it is owed by so called “hardcore clients written off.”
The “hardcore customers” are accused of not honoring repayment and never respond when engaged. M-Kopa wants Sh308,512,947 written off by KRA of which KRA declined on grounds that M-Kopa was not serious in getting to the bottom of the matter.
Briefs we have is that M-Kopa retreated in the lights kits supply after the state started the last mile power supply project.
Directors Exit Plan.
The directors decided to engage in a plan to have a safe way out fearing it was bound to lose badly.
It was then decided that the issue of having inflated debt written off be pursued. To win sympathy which KRA was against from the word go, M-Kopa worked on a paper showing how it was finding it difficult to operate and the headache of recovering the amount being costly.
To hoodwink the tribunal, it argued in papers that pursuing the inflated 47,625 blacklisted customers will cost Sh20,000 each totaling to Sh952.5 million.
The second option of moving to courts is even more expensive as it will cost Sh5.22 billion with each case pursued in legal fee being at Sh109,640.
Out of court option was the last with Sh1.77 billion as cost. It argues Sh37,260 was to be used for each defaulter.
Initially, KRA was demanding Sh308,512,947 from M-Kopa for financial year 2016. The amount was reduced to Sh193,736,915.
To KRA, M-Kopa was not serious in recovering its debts. KRA lost on grounds, M-Kopa had shown, the costs to be used on recovering the loans, was more than the money expected.
M-Kopa Tricks.
M-Kopa is still pursuing the saw called hardcore customers despite the debt having been written off.
On the said basis, if say M-Kopa collects half of the amount owed, KRA will miss out.
The five bench tax tribunal was chaired by Robert Mutuma.
“The truth of the matter is, M-Kopa is still chasing payments from so called hardcore customers,” source revealed.
Electric bikes Trick
M-Kopa also has hidden customers operating electric bikes on credit also under hardcore customers to evade taxes.
The firm started business in Kenya 2022 with a clientele of million. It helps clients also buy TVs and smart phones.
Apart from Moore the CEO and c-founder, others in management are Yesse Denga, David Damberge MD mobility, Everlyne Manasseh is the head of commercial, Pauline Githugu, director external affairs.
Sources say that M-Kopa was at one time was sued by a Kenyan over infringement rights.
Patrick Kamau who owns M-Kopa investments sued the firm together with Safaricom.
Word has it that M-Kopa is finding it difficult to clear a Sh1.8 billion loan it borrowed from General Investments Management founded by former USA vice- president Al Gore.
All eyes are on KRA if it will move on to the High Court in matters relating to M-Kopa as it should to corner these tax cheats.
The Kenya-headquartered fintech had argued that it is incorporated in the United Kingdom, and therefore, should not be subject to Kenyan taxes under the Kenya-UK Double Taxation Treaty. Thus to the firm it is managed and controlled from the UK, claiming that most of its operations are based outside Kenya.
However, the tribunal dismissed noting that M-Kopa’s key management decisions are made in Kenya, as its chief executive officer (CEO), chief financial officer (CFO), and chief commercial officer (CCO) reside in the East African nation.
The tribunal further ruled that M-Kopa had failed to provide sufficient evidence that core operational decisions were made outside Kenya, as stipulated by Kenyan tax law.
Consequently, the company is liable for a portion of the $6.8 million tax bill it owes the KRA, although the exact figure is yet to be determined.
“The appellant’s failure to provide evidence to support its argument that the board had actually made core decisions affecting the operation of the company in the meetings held outside Kenya meant that it had failed to discharge the burden of arving that it was not a resident inKenya as enunciated in Section 30 of the TAT Act,” part of the ruling read.
More to follow….
KenyanHour 