Tax disputes in Kenya were traditionally adjudicated by the High Court, but a raft of changes has led to the increased use of alternative dispute resolution (ADR) and quasi-judicial tribunals in recent years, noted Kenvine Odhiambo (partner and deputy co-head of dispute resolution) and Kivindyo Munyao (associate, dispute resolution) of TripleOKLaw Advocates.
“All parties and the courts and our culture now recognise ADR mechanisms as a way of resolving disputes, including tax disputes,” said Odhiambo. “Kenya established an ADR framework with the enactment of the Tax Procedures Act 2015, which is supposed to ensure dispute resolution is affordable, confidential, and expeditious compared to the normal judicial proceedings.”
The Constitution of 2010, intended to create a fairer society, included within Article 159 on Judicial Authority that: “Alternative forms of dispute resolution, including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms, shall be promoted.”
The use of ADR mechanisms was employed in various areas, including the Kenyan tax regime, pointed out Odhiambo and Munyao, with plenty of evidence that various agencies and private individuals now recognise that disputes shouldn’t be resolved solely through litigation and the judicial process.
For the last decade, the Tax Appeals Tribunal (TAT) has operated in Kenya. It’s a quasi-judicial forum of first instance before any litigation commences on a tax dispute. The ADR framework now sits in front, affording parties the opportunity to find resolution through voluntary mediation before commencing, or in some cases during, any action before the TAT or courts.
It is only in rare cases, noted Odhiambo and Munyao, that tax disputes in Kenya do not first go through the ADR framework to resolve them. These cases usually occur when there’s a question of interpretation of a tax law or public interest issues, when the court pronounces itself, or when a party is not willing to submit to the voluntary ADR process.
TripleOKLaw’s tax practice has “grown in leaps and bounds”, said Odhiambo, with the firm helping clients navigate a wide variety of challenging issues before the courts – all the way to the Supreme Court on occasion – and before tribunals or through the internal Kenya Revenue Authority (KRA) ADR process.
“I think it is important that we offer full services to all our clients, particularly in the tax dispute space,” emphasised Odhiambo, noting the team has addressed a variety of tax-related disputes for clients. “We’ve had customs duty matters referred to the tribunals then to the High Court and Court of Appeal for judicial review. We’ve handled excise duty claims for clients regarding returnable bottles, going through the entire judicial mechanism to the Supreme Court for a case decided in our client’s favour. We’ve argued tariff classification cases, departure prohibition notices, freezing orders issued by KRA, criminal investigations, challenged the legality of Acts passed by Parliament, and resolved tax cases through ADR.”
The growth of the digital economy, and efforts by governments to find ways to gather tax revenue from such businesses, has brought further changes, noted Munyao.
“Kenya was the first country in the region to introduce a digital services tax, courtesy of the Finance Act 2020. It introduced VAT on any digital services or goods supplied, and income tax on the gross income of companies involved in the digital space. Those two changes have really affected non-resident companies and taxpayers engaged in the digital market space.”
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