(Kenya) – The Kenya Revenue Authority (KRA) is facing a significant challenge in its efforts to collect taxes, with KSh 313.5 billion currently tied up in unresolved legal disputes. This amount is split between 747 cases at the Tax Appeals Tribunal (TAT), which accounts for KSh 165.1 billion, and an additional KSh 148.4 billion from 541 ongoing court cases.
The rising number of disputes highlights increasing tensions between KRA and taxpayers, who challenge the authority’s interpretation of tax laws or dispute errors in the tax demands. As these cases accumulate, both individuals and businesses continue to contest the levies, and the revenue that KRA is unable to collect has become a growing concern. These unresolved disputes are hindering the tax authority’s ability to meet its targets, as noted by the Parliamentary Budget Office (PBO).
KRA has faced criticism over its methods of tax enforcement, with President William Ruto himself calling for a more balanced approach. In an October 2023 statement, Ruto urged KRA to avoid harassing taxpayers, emphasizing that tax collection can be efficient without being unpleasant. He suggested that tax officials could adopt a more respectful and kind approach while still being effective in their efforts.
The PBO also pointed out that although 2,543 cases have been resolved, resulting in tax collections of KSh 71.89 billion, the majority of the cases at TAT and in court remain unresolved for years. This ongoing issue underscores the need for KRA to find more effective mechanisms for resolving tax disputes.
To address the increasing number of legal challenges, KRA has turned to alternative dispute resolution (ADR) methods, introduced in 2015. This approach is designed to resolve tax disputes more quickly, without the need for escalation to the TAT or courts. However, ADR is not applicable to criminal tax cases, such as tax evasion or fraud. The PBO has recommended that KRA further improve its relationship with taxpayers, with a focus on promoting ADR as a more collaborative and less confrontational way to handle disputes.
The KRA has also been using tax amnesty programs to encourage taxpayers with outstanding dues, including penalties and interest, to settle their debts. These amnesty programs, introduced under the Finance Act 2023, allow taxpayers to negotiate repayment plans for their overdue amounts.
Looking ahead, KRA is aiming for a tax collection target of KSh 2.91 trillion for the current financial year, up from KSh 2.54 trillion in the previous year. To meet this ambitious target, KRA plans to resolve outstanding cases, expand the tax base, and clamp down on tax evasion. However, the continued legal disputes pose a significant challenge to achieving this goal, and the tax authority will need to find ways to address them in a timely manner to avoid further delays in tax collection.