KRA nets Sh21 billion from out-of-court tax battles

The Kenya Revenue Authority (KRA) netted Sh21 billion through the out-of-court resolution of tax claim disputes with firms between July last year and March.

The taxman has been trying to woo firms to resolve their tax cases through alternative dispute resolution (ADR) mechanisms, which prevent long and winding court battles that may take years to resolve.

Ordinarily, a firm contesting a tax demand by the KRA is allowed by law to present its case to the Tax Appeals Tribunal.

Should either of the parties disagree with the tribunal's ruling, they can appeal at the High Court and then the Court of Appeal if still dissatisfied by the former’s ruling.

KRA said Friday that the ADR approach has seen the number of tax disputes resolved outside court rise by 109 per cent since 2015. It said it used the mechanism to solve 393 cases over the past nine months.

The Tax Procedures Act of 2015 gives the courts or the Tax Appeals Tribunal authority to allow the KRA and firms to solve tax tussles out of court within 90 days.

"Where parties fail to settle the dispute within 90 days, the dispute shall be referred back to the court or the tribunal that permitted the settlement," the Act states.

KRA says settling tax disputes out of court helps firms save plenty of money in legal fees and cuts the time it takes to mutually solve the cases from about 89 days to 42 days.

"Taxpayers have embraced ADR, evidenced by the increasing number of applications being received by KRA. In the current financial year, KRA has recorded a 56 per cent growth in the number of ADR applications, from the 425 received in financial year 2019/2020, to 661," the taxman said.

"The process provides a win-win outcome for the parties, which leaves them happy with the outcome and prevents further escalation of disputes," it said.

In January, KRA collected Sh142 billion in revenue against a target of Sh138 billion, a 6.7 per cent growth compared to the same period last year.

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