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KRA out-of-court deals unlock Sh31.4 billion

Cash recovered by the taxman from disputes settled out-of-court with firms and individuals more than tripled in the year ended June 2021 compared with a year earlier, attributed to increasing awareness and referrals by the courts.
The Kenya Revenue Authority recovered Sh31.4 billion from Alternative Tax Dispute Resolution (ADR) processes compared with Sh9.8 billion the year before.
The 220.41 percent jump in revenue reflects rising successful cases resolved through mediation.
Data shows 552 disputes arising from tax assessments by the Kenya Revenue Authority (KRA) officials were successfully resolved through ADR, nearly double the comparable 284 cases in the year ended June 2020.
“We have marketed and sensititised taxpayers through stakeholder forums and professionals bodies like Institute of Certified Public Accountants of Kenya and the Law Society of Kenya on the importance of the ADR mechanism,” Mr Paul Matuku, the Commissioner for Legal Services at KRA, told the Business Daily.
“The other driver is that when we have opportunities to engage the Judiciary, we tell them to refer some of the qualifying cases by taxpayers to KRA so we do ADR.”
Kenya ushered in the ADR mechanism regime in April 2015 as a way to fast-track the resolution of cases for taxpayers who disagree with the tax bills slapped on them by the taxman.
ADR mechanism is largely seen as the first layer of resolving disputes arising from tax audits before they are escalated to the Tax Appeals Tribunal and the courts.
Section 55 (1) of the Tax Procedures Act provides tax disputes under the ADR process should be resolved within 90 days.
“We have tried to reduce the time from what is stated in the statute to a lower period. Last financial year (ended June 2021) we were doing 43 days on average,” Mr Matuku said.
“The ADR is a win-win situation, not the winner takes it all scenario.”
The tax arbitration process, however, locks out cases that are criminal such as tax evasion, malpractices, and fraud.
The data shows that a paltry 49 cases were successfully resolved through the KRA’s mediation process in the first year of implementation in 2015/16 financial year, rising to 60 disputes in the year that followed. –