The sweet deal that saved SportPesa

SportPesa CEO Ronald Karauri when he appeared before the Senate Justice and Legal Affairs Committee over the halting of betting and gaming licences at County Hall, Nairobi. [Boniface Okendo/Standard]

SportPesa, the beleaguered betting giant, has managed to squeeze a deal on the contested back taxes and settled on a “significantly lower sum”.

The agreed amount will also be paid in phases in the deal, announced earlier in the week, allowing the firm's return to operations after a two-month absence, much to the reprieve of millions of its customers.

Kenya Revenue Authority announced that the firm had been cleared but in a highly-confidential pact which people feel is too delicate to speak about – at least until the operating certificate is granted.

Sources said the pact indicates that KRA was unrelenting in the tough and long negotiations that culminated in the clearance that paved way for the breakthrough announced on Tuesday.

With the clearance from the taxman, SportPesa will now have to reapply for an operating licence from the Betting Control and Licensing Board (BCLB).

Only the top management of either institutions were involved in the closely-guarded talks, which excluded officials who would ordinarily be involved in such arbitration.

SportPesa also committed to abide by the taxation schedule, which requires gamers to part with 20 per cent of their winnings in withholding tax.

Betin, the other significant gaming firm majority-owned by Mauritius trust companies, has not been as lucky in its wish to return to operations.

An official privy to the details of the agreement confirmed that the amount owed would be settled in full, indicating the huge concessions made by Sportpesa owners who have silently been chasing the clearance. “They have committed to settle the amounts but asked KRA to spread payments over several years,” said the official.

For the taxman, agreeing to the settlement plan is still a win, rather than act tough and close the company while losing out on the entire amount.

KRA confirmed the agreement but formally refused to provide the details, citing client confidentiality since the company was a taxpayer just like any other individual.

“The Kenya Revenue Authority is bound by law not to reveal tax affairs of an individual or a company. The information is treated as confidential under Section 6(1) and (2) of the Tax Procedures Act and Section 125 of the Income Tax Act and same are held as such,” the agency said in a statement.

KRA also added that tax clearance is a requirement to be tax compliant in order to get regulatory approvals or conduct business with Government.

“It is on this basis that Betting Control and Licensing Board requires tax compliance from gaming operators for renewal of licences. To date, 14 out of 34 operators have complied with tax laws,” the statement added.

KRA’s letter indicating SportPesa clearance has been sent to BCLB, the betting regulator’s top management confirmed but said the particulars of the agreement were a matter between the taxman and the betting firm.

Peter Mbugi, BCLB director-general, told The Standard on Wednesday receipt of the tax clearance is among the requirements for processing the licence.

Other requirements are a clean criminal record of the owners plus a security deposit.

It could not be immediately confirmed whether the betting giant had already lodged its fresh application.

SportPesa expressed confidence in its Tuesday update, saying the tax dispute is among the issues it has been engaging stakeholders on.

The firm is expected to issue a comprehensive statement on Monday relating to its return, and possibly about the concessions it has had to make in its now ended duel with the taxman.