NAIROBI, Kenya- In a win for efficiency and collaboration, the Kenya Revenue Authority (KRA) has unlocked a staggering Sh21.9 billion in tax revenues through its Alternative Dispute Resolution (ADR) mechanism.
The achievement, marked by the conclusion of 1,184 cases in the 2023/2024 financial year, underscores the growing success of ADR in resolving tax disputes quickly and cost-effectively.
This innovative approach has helped KRA enhance compliance while fostering a cooperative environment for taxpayers and the authority to address disagreements.
First introduced in Kenya under the Tax Procedures Act, 2015, ADR offers a faster and less confrontational alternative to traditional legal channels like the Tax Appeals Tribunal or courts.
By utilizing methods such as mediation, arbitration, and negotiation, ADR has revolutionized how tax disputes are resolved in the country.
This streamlined approach is particularly appealing to businesses as it reduces costs and time spent on prolonged litigation, enhancing Kenya’s overall investment climate.
ADR begins when a taxpayer appeals a decision by the KRA Commissioner or an appealable decision under the Tax Procedures Act.
Cases eligible for ADR include unconfirmed assessments, confirmed assessments open to mutual review, or disputes already before courts or tribunals where parties opt for an out-of-court resolution.
The process is voluntary, participatory, and aims to find a mutually acceptable resolution.
However, ADR discussions can be terminated under specific conditions, such as undue conduct by either party or consistent failure to attend scheduled meetings. If terminated, parties can return to legal channels for resolution, as if ADR had not been initiated.
One of ADR’s standout benefits is its cost-effectiveness. Traditional court cases can take years and come with hefty legal fees, while ADR typically concludes within weeks or months, saving both time and money.
Moreover, ADR encourages higher compliance levels. Taxpayers are more likely to honor agreements reached through mutual negotiations, creating a cooperative environment that benefits both parties.