How the Wise co-founder went from tech darling to tax shame list | Financial sector


OWhen payments company Wise floated on the London Stock Exchange last summer, it propelled its founders into the ranks of Britain’s wealthiest people. But Kristo Käärmann, one of the two Estonians who launched the firm, soon found himself on an altogether less desirable list: named and shamed as a tax defaulter by HM Revenue and Customs.

Käärmann has been identified as failing to pay £720,000 in tax, joining a series of restaurants, builders and even a strip club who had all fallen victim to the tax authorities. HMRC describes the faults as “deliberate”, but Wise insists it was to keep his “personal administrator in order”.

With the investigation by the UK’s Financial Conduct Authority, this breach of personal administration could prove even more costly for a man whose innovation has made him a darling of the London tech scene. CAF has the power to withdraw its approval to be a senior executive. If they did, it would be difficult for him to continue running the business he built.

Käärmann grew up in Tallinn, the capital of Estonia, and attended university in its second city, Tartu, but the idea for Wise, originally known as Transferwise, came as he worked in London for Deloitte, one of the Big Four accounting firms. When he tried to transfer his Christmas bonus to Estonia, he lost £500 due to an unfavorable exchange rate, with a £15 fee adding insult to injury. This inspired him to set up an informal arrangement with an acquaintance from Estonia to mirror transfers on either side of the border – thus avoiding the scam.

The acquaintance, met by chance at a party in 2007, was Taavet Hinrikus, the second employee of Skype, a tech unicorn – the name of startups worth over a billion dollars – bought by Microsoft who also has Estonian roots . Together the duo founded Wise in 2011 with backing from investors including Sir Richard Branson, Skype’s Niklas Zennström and PayPal co-founder Peter Thiel who specializes in investing in tech companies such as Facebook as well as causes. right-wing politicians.

Wise is based in Shoreditch in East London, the capital’s fintech hub, and it’s been growing steadily. While the company will report its first annual results as a public company on Tuesday, it said in a January business update that it had 4 million customers transacting in the last three months of 2021. paid out £150m in revenue, against a trading volume of nearly £21bn.

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Wise reached a valuation of nearly £12bn in September, making the two co-founders billionaires on paper. However, investors’ abandonment of growth stocks amid fears of higher interest rates dampened enthusiasm, and the payments company started the week at £3.9bn, less than half the valuation of its London market debut a year ago.

Käärmann, 41, has retained more power over Wise than majority shareholders typically do when listing shares in the UK: A controversial American-style share structure gives him nearly half the vote at company meetings.

Käärmann has not commented publicly on the personal tax issue, but in a statement Wise said, “Kristo intends to fully cooperate with the FCA in its investigation.”

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