The Kenya Revenue Authority (KRA) has unlocked Kes 21.9 billion through the Alternative Dispute Resolution (ADR) mechanism following the conclusion of 1,184 cases in the 2023/2024 Financial Year 2023/2024.
KRA says the achievement is attributed to the improvement of the tax dispute resolution rate, which grew from 78% in the financial year 2020/21 to 81% of disputes completed using the ADR mechanism.
The period for resolving disputes was also enhanced to an average of 38 days from the statutory period of 120 days.
Kenya first introduced ADR in April 2015 with the Tax Procedures Act, No. 29 of 2015, which paved the way for resolving tax disputes between the Commissioner and taxpayers outside the traditional court systems.
The process was instituted as an alternative to the legal mechanism under the Tax Appeals Tribunal Act, 2013, which was enforced as part of the business reforms to boost the country’s investment climate.
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Some of these methods include mediation, arbitration, and negotiation.
The ADR process commences with the taxpayer's appeal of a tax decision made by the Commissioner or to an appealable decision as stipulated under the Tax Procedures Act of 2015.
The dispute results in an appeal with the Tax Appeals Tribunal or Courts of Law.
The process is a voluntary and participatory discussion over a tax dispute between a taxpayer and the Commissioner.
These disputes are assigned a statutory period of 120 days for cases to be concluded or revoked if an agreement is not reached.
Disputes appropriate for ADR include but are not limited to those whose assessment has not been confirmed, cases in which an assessment has been confirmed but the parties mutually agree to undergo a self-review, or disputes that are before the Courts/Tax Appeals Tribunal but where the parties desire an out-of-court settlement.
The model also allows taxpayers to apply for ADR even after taking the case to court.
ADR discussions may or can be terminated where either party opts to do so if one or more parties believe that the dispute cannot be resolved due to undue conduct on the part of either party and when a party consistently fails to honor ADR meeting invitations when specifically requested to do so without any justifiable cause.
Once the ADR discussions have been terminated, both parties may proceed to have the matter determined by the Tax Appeal Tribunal or Courts as if no ADR discussions had occurred.
KRA’s employment of this model has proven to be more cost-effective as it avoids extensive legal fees and prolonged litigation expenses.
The process is shorter and quicker, compared to courts, which may take several years for a legal case to go to trial but with ADR, it only takes a few weeks or months to file an ADR consent.
