Michael Joseph taxes lift executive pay at Safaricom

 

Mr Michael Joseph, former Safaricom chief executive officer. FILE

By MICHAEL OMONDI

IN SUMMARY
The directors’ total pay package increased to Sh387.6 million in the period to March, up from Sh204.2 million a year earlier.

Safaricom on Friday attributed 57 per cent or Sh221.5 million of the directors pay to costs related to Mr Joseph’s delayed tax settlement and bonuses paid to Bob Collymore (CEO) and former finance chief Chris Tiffin.

The remaining share included directors’ fees and fixed salaries paid to Mr Collymore and John Tomblesson, the chief financial officer.

Bonuses paid to top Safaricom executives and tax liabilities of the operator’s former CEO, Michael Joseph, lifted the firm’s directors’ pay 90 per cent in the year to March.

The directors’ total pay package increased to Sh387.6 million in the period to March, up from Sh204.2 million a year earlier, the operator’s annual report disclosed last week.

Safaricom on Friday attributed 57 per cent or Sh221.5 million of the directors pay to costs related to Mr Joseph’s delayed tax settlement and bonuses paid to Bob Collymore (CEO) and former finance chief Chris Tiffin, which are settled after a three year performance review.

The remaining share included directors’ fees and fixed salaries paid to Mr Collymore and John Tomblesson, the chief financial officer.

Mr Tiffin quit the firm in November 2011 after two-year stint while Mr Joseph, 67, retired as CEO in 2010 after serving for a decade.

“It’s to do with Michael having dual nationality and he was to pay taxes in jurisdiction outside of Kenya. Vodafone paid that on behalf of Safaricom to the appropriate tax authority on time, but delayed recharging Safaricom,” Mr Tomblesson told the Business Daily on Friday, adding that the tax charge covered seven years.

“This looks high because its seven years of recharges in one year. There is also a component of Bob and Chris Tiffin (the previous CFO) long term reward, which depends on three years of performance. So when that is paid, two years belongs to prior years and one year to the current year.”

As an American citizen working in Kenya, Mr Joseph was expected to pay taxes to the two governments from his Safaricom income.

Vodafone settled the US tax bill and delayed in recovering the amount from the Kenya firm, where it owns a 40 per cent stake.

Many nations sign bilateral double taxation agreements with each other and the pacts, in some instances, require that tax be paid in the country of residence and be exempt in the country in which it arises.

Kenya Revenue Authority in its website does not list the US as one of the countries that Kenya has inked a double taxation treaty with, giving Washington the right to income of nationals working locally like Mr Joseph.

Profitable

During his 10 years at Safaricom, Mr Joseph helped turn the company from a start-up into one of the most profitable firms in the region, building its subscriber base to more than 16 million from 17,000. Safaricom had 19.4 million subscribers in March.

He presided over the company during a popular IPO in 2008 that added 800,000 investors to its shareholder register on top of Vodafone and the Kenyan government, which has a 35 per cent stake.

He also pioneered the successful M-Pesa mobile money transfers and remains a non-executve director of Safaricom.