KEY POINTS
- KRA secured Ksh 21.9 billion ($169.7 million) through ADR, resolving 1,184 cases in the 2023/2024 financial year.
- ADR completion rate increased from 78% in 2020/21 to 81%, with disputes resolved in 38 days.
- ADR enhances efficiency, reducing legal fees, promoting compliance, and improving Kenya’s business environment.
Kenya Revenue Authority (KRA) has successfully secured Ksh 21.9 billion ($169.7 million) in revenue through its Alternative Dispute Resolution (ADR) process, resolving 1,184 tax-related cases during the 2023/2024 fiscal year.
This marks a notable improvement in Kenya’s tax dispute resolution system, underscoring the efficiency of ADR in streamlining conflict resolution outside the formal court structure.
According to Capital Business, the ADR process has seen consistent progress, with its completion rate rising from 78 percent in 2020/21 to 81 percent in the current year. Furthermore, the average time to resolve disputes has been reduced to just 38 days, a significant improvement compared to the statutory 120-day period required for tax dispute resolution.
Streamlining tax disputes through ADR
Introduced in April 2015 under the Tax Procedures Act, ADR offers a more efficient alternative to traditional litigation, using methods such as mediation, arbitration, and negotiation.
Designed to alleviate the burden of protracted court battles, ADR aims to create a more conducive business environment in Kenya by promoting quicker resolutions and reducing the legal complexities faced by taxpayers and the KRA alike.
The ADR process kicks off when a taxpayer appeals a tax decision or seeks to resolve a dispute under the Tax Procedures Act.
Participation is voluntary, with both parties engaging in discussions to reach a mutually acceptable settlement. If no agreement is reached within the prescribed timeline, the matter can be escalated to the Tax Appeals Tribunal or formal court proceedings.
Cost-effective and efficient resolution
ADR has proven especially effective in disputes involving pending tax assessments or cases that are already confirmed but under mutual review. It provides a platform for resolving these issues without the need for extended litigation, significantly cutting legal expenses for all involved.
While ADR discussions can be ended by either party—especially in cases of non-compliance or bad faith—the process remains a quicker, more cost-effective alternative to the traditional judicial route, which can take years to resolve.
By resolving cases more efficiently, ADR has contributed to higher compliance rates. Both parties are more inclined to honor the agreements reached, resulting in better tax collection outcomes and fostering a more robust business environment in Kenya. As such, the KRA’s ADR strategy represents a key pillar in its broader efforts to enhance tax compliance and streamline Kenya’s tax administration.
