The Kenya Revenue Authority (KRA) more than doubled collections from negotiated tax dispute settlements in the year ended June, signalling a recovery after last year’s near collapse.
The receipts were, however, below levels achieved two years earlier.
KRA’s data shows collections through the Alternative Dispute Resolution (ADR) programme rose to Sh35.06 billion in the 2025/26 financial year from Sh15.3 billion a year earlier, a 129.22 per cent jump.
The ADR collections were, nonetheless, about 42 per cent below the Sh60.47 billion realised in 2023/24 and less than half the Sh71.84 billion collected in 2022/23, highlighting the challenge of restoring the programme to its previous scale.
ADR allows taxpayers and KRA to resolve tax disputes through negotiations instead of lengthy litigation before the Tax Appeals Tribunal or the courts, helping the KRA unlock disputed revenue faster while lowering legal costs for both parties.
“Alternative Dispute Resolution (ADR) remained a key mechanism for resolving tax disputes efficiently, with 993 cases concluded, yielding KES 35.062 billion in revenue,” Commissioner-General Adan Mohamed said in KRA’s annual performance report.
Times Tower, the Kenya Revenue Authority's head office in Nairobi.
Photo credit: Dennis Onsongo | Nation Media Group
Last fiscal year’s recovery follows an exceptionally weak 2024/25 financial year, when the number of concluded ADR cases plunged to 97 from 6,776 the previous year, while collections dropped to Sh15.3 billion from Sh60.47 billion.
The latest figures indicate KRA has revived the programme, although it is still processing only a fraction of the disputes it handled before last year’s slump.
In 2022/23, the authority concluded 7,458 ADR cases worth Sh71.84 billion, making last year’s performance well below the programme’s historical highs.
The increase in concluded disputes also outpaced growth in revenue, suggesting the average value of disputes settled through ADR fell as the authority cleared more cases.
Based on KRA’s data, the average revenue generated per settled dispute declined to about Sh35 million last year from about Sh158 million in 2024/25, indicating a larger number of relatively smaller disputes were resolved.
The improved performance comes as KRA steps up compliance efforts aimed at resolving disputes more quickly, while strengthening tax administration through technology and data-driven enforcement.
The authority has expanded the use of third-party data, electronic tax invoices and transaction matching to identify inconsistencies between taxpayers’ declared income and their actual business activity.
Where audits or additional tax assessments trigger disputes, ADR provides taxpayers with an opportunity to negotiate settlements with KRA before cases proceed to the Tax Appeals Tribunal or the courts.
The programme complements KRA’s compliance strategy, which also saw the KRA collect a record Sh144.82 billion from outstanding tax debts through follow-up on unpaid assessments and instalment payment plans agreed with taxpayers.
The tax authority has increasingly combined negotiated settlements with tougher enforcement measures, using digital tools to identify non-compliant taxpayers while encouraging those willing to cooperate to resolve disputes through ADR.
Negotiated settlements can reduce uncertainty, legal costs and time associated with lengthy tax litigation, allowing firms to focus on operations while regularising their tax affairs.
