In the silent revolution against the conventional practice of enforcement, taxpayers all around the world are currently showing more interest in discovering methods of resolving business issues without having to go to trial.

KRA, the Kenyan Revenue Authority has joined the revolution and also among the agencies that have chosen the Alternative Dispute Resolution (ADR) for resolving tax disputes. This has brought about a 20% rise in ADR in the previous financial year, an indication that facilitation and trust have become a critical part of resolving tax-related disputes.

Most taxpayers encountering disputes with KRA are currently seeking methods of settling disputes amicably without trial and it is evidently shown in the increase in the number of cases that are carried out using ADR as 284 tax issues finalized in the FY between 2019 and 2020 as opposed to 237 that was finalized between 2018 and 2019.

ADR has been completely embraced by the authority to provide a strategic approach in resolving disputes that have its foundation on trust, for advanced compliance. This new strategy for dispute resolution has offered more benefits to the involved parties which are good for everyone involved.

The facilitated mediation type of ADR is employed by KRA for dispute resolution where a neutral mediator helps the parties involved to arrive at a friendly settlement or solution. ADR can be used to resolve all tax disputes with the exception of those that were a result of criminal tax evasion or constitutional offenses.

The KRA’s determination to use ADR in 2015 was a result of the need to resolve the increasing tax dispute backlog that was unresolved at the courts and the Tax Appeals Tribunal (TAT). It was discovered that the conventional methods of dispute resolution using litigation has posed several difficulties, such as low compliance, increased cost of litigation, and the unfavorable relation between the taxpayers and the KRA.

Even though the reception of the ADR at the beginning was very low, this methodology is currently gaining acceptance throughout the country. The increasing amount of applications in the last couple of years is an indication of the position ADR would be as an accepted method of resolving tax issues.

Apart from developing a platform where disputes can be easily resolved between taxpayers and the KRA, ADR is also a major enhancement method. Since its launch, ADR has assisted KRA in emancipating trapped revenues in tax disputes successfully and quicker. In the last financial year, the revenue generated by ADR was KShs. 9.561 billion as opposed to KShs. 8.102 billion was generated between 2018 and 2019 which is an 18% increase in revenue.

Therefore, one might be confused about opting for ADR. As opposed to the litigation process, ADR offers several benefits to the parties involved. This would explain the high increase in its acceptance within a short time throughout the country after its launch. One of the benefits of ADR is the time factor. As stated by the Tax Procedures Act 2015, ADR cases are expected to be resolved in less than ninety days which makes the platform time efficient. Most cases are even resolved before the ninety-day timespan.

Secondly, ADR is affordable as it incurs no cost.

Thirdly, control, and flexibility of the issue at hand by the parties involved is certain. As opposed to litigation, the ADR mediations enable parties to have complete control of the entire procedure. This implies that the parties have more control and significant say on the results and the negotiations and also have the ability to influence the negotiations to a quicker resolution. Considering that the resolution through the ADR is beneficial to the parties involved, the result can have to be predicted. This beneficial outcome for both parties is the reason ADR is the most effective platform for taxpayers and taxmen to establish a relationship. This will cause an increase in the level of compliance.

Fourthly, the ADR platform requires limited formalities. The informal structure of the mediation enables the parties involved to become more engaged than a court procedure. Appropriately, since mediation is directly handled by the parties involved, the mediator can sufficiently focus on the requirements and desires of the parties involved which would increase the speed of the resolution.

Another benefit of the ADR is the confidentiality in nature than that of litigation. Fewer parties are required without any documentation of transcripts or any other proof during mediation which can be subsequently revealed. This makes negotiations and agreements faster.

Considering the high increase in the amount of tax dispute that is being resolved and the revenue generated since the inception of the ADR, it has proven that the ADR is still the best bet.

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