Inside SportPesa's ambitious Sh830million a month tax repayment plan

As SportPesa plans to return to the market armed with a court order and a different licence, new revelations are emerging on how its mother company, Pevans East Africa Ltd, promised to pay up Sh15 billion tax obligation in record 18 months.

The September 2019 promise by the gambling outfit run by Captain Ronald Karauri was pegged on return to operations, following a tiff with the Government on withholding tax on winnings.

But in a new twist, a company by the name Milestone Games Limited has emerged, armed with a deal between it and Pevans to operate the SportPesa brand.

The SportPesa CEO had promised KRA that its holding company, Pevans East Africa, would pay KRA Sh830 million in monthly installments, a situation that would put it into the government’s good books.

Being a different company, it is highly unlikely that Milestone can take up tax obligations of the brand they have adopted.

In a letter to the former Commissioner of Domestic Taxes, Elizabeth Meyo, on September 15, Karauri confirmed that Pevans East Africa would be paying Sh838 million on or before the 20th day of each month.

“We confirm that we are willing to pay the said sum of Sh15.1 billion on the terms and understanding set out in our letter of the 27th August 2019,” says Karauri in the letter.

“As you are aware, we are currently not in business and therefore it would be difficult for us to commence making payment in the month of September 2019.”

He proposed the payment to begin from October 2019 when they hoped to be back in business “and thereafter on the 20th day of each succeeding month.”

However, by October 10, 2019, the company had not resumed operations. Karauri wrote back to KRA alerting them of inability to pay following a delay in issuance of operating licence by the Betting Control and Licensing Board (BCLB).

“We have and we continue to work with BCLB to meet all the requirements for issuance of our operating licence. We remain confident that we will be issued with our operating licence to resume our operations in the near term,” Karauri wrote.

It is not clear what happened between BCLB and Pevans between then and October this year when the new company, Milestone Games Limited, emerged with a deal between it and Pevans to operate the SportPesa brand.

Immediately, BCLB opposed the move, saying SportPesa brand belonged to Pevans East Africa Ltd, and that there was a court matter relating to the Pevans’ licence, which was coming up by November 16.

“The board is of the opinion that Milestone Games Ltd will create confusion to the general public to which trade name the company wishes to adopt. The reason being that there is a variance in the trade name approved by the board vis a vis the name Milestone Games Ltd currently wishes to adopt,” BCLB boss Cyrus Maina.

The matter ended up in court and on Wednesday, Justice Pauline Nyamweya froze the BCLB’s decision until the case filed by Milestone Games is heard and determined. Two days later, BCLB wrote to Milestone with good news:

“Pursuant to Section 4(1)(b) of the Betting, Lotteries and Gaming Act, Cap 131, the suspension of your bookmakers licence for 2020/21 FY has lapsed. Further, our letter of 20 October 2020 mentioned herein is hereby withdrawn,” Maina wrote on Friday.

The previous day, BCLB had written to Milestone setting up a meeting for November 26. This was similarly swallowed by the new turn of events.

On Friday last week, Justice David Majanja lifted freeze order issued in favour of Kenya Revenue Authority (KRA) after finding that the agency had failed to disclose to the court that a similar request to another court had been declined.

The KRA had urged the court to freeze Pevans’ accounts, claiming that it owed it some Sh14 billion in tax. Justice Majanja found that KRA had given Justice Margaret Muigai a similar narrative and she rejected it.

“The evidence shows that the issue of withholding taxes has been the subject of correspondence between the parties for some time before KRA invoked section 43 of the TPA. KRA failed to disclose the fact that it had filed the First Application and that Muigai J. declined to extend the preservation orders,” Justice Majanja said.

He said he had come to the “irresistible conclusion” that KRA deliberately suppressed facts, which would have had a bearing on whether or not he should have granted and extended the preservation orders.