Economy
KRA unlocks Sh15.2bn taxes from mediation
Thursday July 13 2023
Times Tower in Nairobi, the Kenya Revenue Authority headquarters. FILE PHOTO | DENNIS ONSONGO | NMG
The Kenya Revenue Authority recovered Sh15.2 billion from out-of-court settlements with firms and individuals, slightly less than half the value two years ago despite resolved cases nearly doubling.
According to the taxman, some 1,038 disputes were successfully concluded through Alternative Tax Dispute Resolution (ADR) last financial year.
Read: Why businesses should opt for mediation to solve rows
“Instead of all of us rushing to tax disputes tribunal, or going through other appeal processes like the High Court and Court of Appeal, why can’t we sit around the table and have a conversation,” KRA acting commissioner-general Rispah Simiyu said in an interview with Citizen TV Tuesday evening.
Ms Simiyu did not disclose the numbers for the 12 months of the previous year ended June 2022.
The KRA had earlier reported that 319 cases had been resolved in the first half of the just concluded fiscal year [July-December 2022], yielding Sh10.4 billion in tax receipts.
The cash recovered in the full year was, however, 48.4 percent of Sh31.4 billion in the year ended June 2021. That was despite the cases through the ADR last fiscal year jumping 88.04 percent compared with two years earlier.
Kenya ushered in the alternative dispute resolution in April 2015 as a way to fast-track the resolution of cases for taxpayers who disagree with the tax bills the taxman demands from them.
The ADR 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 should be resolved within 90 days.
“The ADR is a win-win situation, not the winner takes it all scenario,” Paul Matuku, the Commissioner for Legal Services at KRA, told the Business Daily in a past interview.
“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.”
The tax arbitration process, however, locks out cases which are criminal such as tax evasion, malpractices and fraud.
The ADR process was instituted as an alternative to the legal mechanism under the Tax Appeals Tribunal Act, 2013 which was enforced as part of business reforms aimed at boosting the country’s investment climate.
“A huge obstacle to the realisation of our national revenue target is that in practice tax administration has traditionally been a repressive, menacing affair which resembles extortion,” President William Ruto said during last year’s annual taxpayers day on October 28.
“This extinguishes taxpayer incentive and diminishes the prospect of an expanded tax base pulling Kenya backwards from its national revenue potential and denying its citizens critical services and development programmes.”
Read: Banks count on mediation to unlock Sh39bn tied in courts
The KRA has in the past come under fire from business leaders who have complained of a tax regime that is largely unpredictable and one that overburdens a few persons and firms in the formal sector with increased taxes.
“Where a taxpayer admits to owing tax but not being able to pay in a lump sum, we have given a payment plan. What we, however, encourage our taxpayers is that as we give you a payment plan, as a sign of goodwill, try as best as you can to sustain the payment plan because when you default, the tendency is to call it all up,” Ms Simiyu said in the TV interview.
“That does not mean shutting you down, but [we look at] what else can we do to facilitate you, so that we would rather have that little [money] trickling in than nothing at all.”
