Jumia defends move to list at NY stock exchange

Jumia's listing at the New York Stock Exchange has drawn mixed emotions among Kenyans and the region.

The  E-commerce platform which runs in 14 African countries including Kenya has defend its move despite heavy criticism from the region.

“We listed in a foreign market because that’s the place where people understand the business model best,” Jumia Kenya CEO  Sam Chappatte told the Star.

In an interview with CNBC television, Jumia CEO Sacha Poignonnec said Africa lacks enough proper developers and development.

He was responding to a question on why they have their tech tower in Portugal and not Africa which is their key marke.

Following Jumuia's move, the government is likely to lose millions of shillings in revenue due to weak taxation laws on e-commerce businesses.

According to Strathmore University Centre for Intellectual Property and Information Technology law a government’s authority is based on territory and jurisdiction.

This policy blocks out Kenya from receiving the majority of Jumia’s corporate taxes because it’s a German Stock Corporation.

In 2017, Jumia reported an 80 per cent year-on-year growth despite recording a decrease in gross profit from € 30.2 million (Sh3.4 billion) in 2016 to € 27 million (Sh3.05 billion).

However, despite the profits, Jumia is a “German stock corporation” meaning it will pay the majority of its corporate taxes in Germany and less in its subsidiary countries.

This is according to documents filed with the United States Securities and Exchange Commission.

“In many instances, these companies are registered in other low tax jurisdictions such as Delaware in the US or Ireland in Europe. This makes it difficult for Revenue Authorities to determine the level of tax to be paid locally,” Tax Justice Africa Deputy Executive Director Jason Braganza said.

It was founded by two French brothers, has its warehouse headquarters in Dubai and its tech tower is operated from Portugal.

According to Commercial Tax lawyer Donald KipKorir, Capital Markets Authority and Kenya Revenue Authority should impose fees and taxes on the money it raises in the NYSE public offering.

“…The payment must be that which companies pay in Kenya to IPO at NSE,”Kipkorir said.

Jumia is just one among other digital businesses such as Facebook, Twitter, and Amazon which evade taxation due to tax loopholes.

As of last year, the European Union was pushing for the introduction of a new levy on the revenue of the tech firms.

The union wants to the levy pegged on at least three per cent on the sales of the companies with global annual revenue of Sh85.3 billion or more.

Three days ago Jumia went public on NYSE, opening its shares at $14.50 (Sh1464.35) and closed this at $25.46 (Sh2, 800) yesterday.