It is an alternative method of resolving and managing tax disputes outside the; Dispute Resolution (ADR)
- Judicial process (Courts of law)
- Quasi-Judicial Process or Tax Appeals Tribunal (TAT)
It is a mechanism that expedites the resolution of tax disputes.
Parties to an ADR Process;
Role of Parties
- Uphold and maintain decorum, and confidentiality.
- Participate in all discussions fairly and diligently.
- Make full disclosure of material facts relevant to the Tax dispute.
- Attend all scheduled meetings.
- Strictly adhere to the agreed timelines.
- Shift from enforcement to trust and facilitation.
- Delays in the conclusion of cases before courts and tribunals.
- Without Prejudice
- Preserves relationships
- Higher compliance levels as parties are more likely to abide by the negotiated outcome.
- Uncertainty over the outcome of a case for both KRA & the taxpayer.
- The Kenyan Constitution encourages ADR as a principle in coming to a negotiated settlement.
Disputes appropriate for ADR
- Disputes on which tax assessment has not been confirmed;
- Disputes on which tax assessment has been confirmed but the parties mutually agree to a self-review;
- Disputes before the Courts/ Tax Appeals Tribunal but where the parties desire an out-of-court settlement.
The following scenarios are the exception;
- The settlement would be contrary to the Constitution, the Revenue Laws or any other enabling Laws.
- The matter borders on technical interpretation of law.
- It is in the public interest to have judicial clarification of the issue.
- There are undisputed judgments and rulings.
- A party is unwilling to engage in ADR process.
What are the ADR timelines?
- 90 days as provided for in Tax Procedure Act (TPA) section 55;
- Court initiated ADR ? Dependent on court timelines granted
The Tax Procedures Act, No 29 of 2015 (TPA), provides for an elaborate Internal Dispute Resolution Mechanism (IDRM). A tax dispute commences with an objection by the Taxpayer to a tax decision made by the Commissioner or to an appealable decision as stipulated under the TPA, 2015. The dispute culminates to an Appeal to the Tax Appeals Tribunal or Courts of Law.
This Framework seeks to improve on the IDRM by introducing ADR as an additional and/or alternative means of resolving tax disputes outside the judicial and quasi-judicial process.
ADR is a voluntary, participatory and facilitated discussion over a tax dispute between a taxpayer and the Commissioner. It is in the form of facilitated mediation and not arbitration as envisaged in the Arbitration Act, (Chapter 49 Laws of Kenya), as the facilitator has no power to impose any decisions regarding the outcome of the tax dispute. Instead, the parties are facilitated to find a solution to the dispute.
Overall, ADR seeks to enrich the entire dispute resolution process by providing flexibility and timely/early dispute management without the limitations imposed by judicial and quasi-judicial processes as regards technical procedures, untimely decisions and the rising costs of litigation.
Today, ADR is widely favoured over litigation and applied in a number of Tax Revenue Administrations globally with great success. This Framework has been benchmarked against the experiences of these Tax Revenue Administrations.
Read The Alternative Dispute Resolution Framework in full.