KRA Turns to Out-of-Court Tax Settlements to Unlock Billions in Revenue

The Kenya Revenue Authority (KRA) is increasingly resolving tax disagreements through negotiated settlements, a move that is helping the agency recover substantial amounts of revenue while reducing the time and cost associated with lengthy court proceedings.

Alternative Dispute Resolution (ADR), which allows taxpayers and the tax authority to negotiate acceptable outcomes without full litigation, has become one of KRA’s key strategies for improving tax administration. The mechanism has enabled the authority to conclude disputes faster, allowing businesses to clear outstanding obligations while enabling the government to access revenue that might otherwise remain locked in legal battles.

Tax experts say the growing use of negotiated settlements reflects a shift toward a more collaborative approach to tax enforcement. Instead of relying solely on court processes, KRA is encouraging taxpayers to engage with the authority early whenever disagreements arise over assessments or tax obligations.

The agency has maintained that ADR does not replace enforcement but provides a structured framework for resolving genuine disputes in accordance with existing tax laws. Once an agreement is reached, taxpayers are expected to settle the agreed liabilities within the prescribed timelines.

The increased use of negotiated settlements comes as KRA continues implementing broader reforms aimed at expanding the country’s tax base and improving voluntary compliance. The authority has invested in digital tax systems, enhanced risk-based audits and strengthened debt recovery measures to improve overall revenue performance.

Business leaders have generally welcomed faster dispute resolution, arguing that prolonged tax cases often create uncertainty, tie up company resources and discourage investment. Quicker settlements allow firms to focus on operations while bringing certainty to their tax obligations.

Analysts also note that reducing the backlog of unresolved tax disputes benefits both taxpayers and the government. Businesses save on legal expenses and administrative costs, while the government improves cash flow by collecting revenue sooner.

As Kenya seeks to strengthen domestic revenue mobilisation to finance public expenditure, KRA is expected to continue promoting alternative dispute resolution alongside compliance campaigns and enforcement measures. The authority believes a balanced approach that combines enforcement with taxpayer engagement will support sustainable revenue growth while fostering a healthier relationship between tax administrators and the business community.