The Kenya Revenue Authority (KRA) netted Sh4.37 billion in revenue from alternative dispute resolution (ADR) in the first quarter of the financial year 2023/24, even as the tax agency pushes for enhanced adoption of out-of-court deals to increase revenue collection.
KRA acting Commissioner for Strategy, Innovation, and Risk Management Alex Mwangi says potential tax revenue of over Sh300 billion is currently locked in court battles between the tax agency and taxpayers.
Mr Mwangi said ADR has expedited the resolution of tax disputes, cut the cost of tax dispute resolution that is associated with litigation, and improved service delivery.
“If you look at the potential revenue that has been held up because of court cases it is more than Sh300 billion. Now we have the tax amnesty programme and we hope that people will pull out those cases from the court to take advantage of the amnesty,” he said in an interview on Wednesday.
Already, the taxman revealed that it has netted Sh3.4 billion in revenue from its ongoing tax amnesty programme that ends in June next year.
The Finance Act, of 2023 introduced a tax amnesty for interest and penalties on tax debt. The amnesty took effect on September 1, 2023.
Through the programme, taxpayers who have no outstanding principal tax for the period to December 31, 2022, but have penalties and interest qualify for the waiver.
KRA says ADR provides taxpayers with flexibility and timely/early dispute management without the limitations imposed by judicial and quasi-judicial processes and the rising costs of litigation.
“Through ADR, we can get revenue much faster and the taxpayer can be freed to concentrate on their operations. It also saves crucial resources for both the public and the taxpayer,” said Mr Mwangi.
According to the National Tax Policy published by the National Treasury in April 2023, tax dispute resolution in Kenya is in most cases “adversarial, occasioning a high number of disputes at the Tax Appeals Tribunal (TAT) and in the courts”.
As part of measures to streamline tax dispute resolution, the policy says the government will review the process to reduce the cost and time of dispute resolution and establish a technical committee to deal with public and private rulings regularly.
It also provides for autonomy of out-of-court process, setting up of a High Court that will specialise in tax matters, and enhanceJudicary capacity to deal with tax disputes.
