Effects of alternative dispute resolution on Tax Revenue Performance in Kenya, A case study of Kenya Revenue Authorit

Abstract

World over, tax disputes have attracted several resolution mechanisms chief of which are Alternative Dispute Resolution (ADR) and litigation. The constitution and the Revenue laws do not conclusively provide guidelines to every tax matter. Tax Authorities therefore retain discretion in deciding the course of certain tax issues. In the process of discretionary interpretation of tax matters and while implementing tax collection strategies, Tax Authorities invariably aggrieve taxpayers giving rise to disputes. An establishment of a fully- fledged section of ADR was instituted by KRA to help handle these cases. The purpose of this study was to determine the influence of Alternative Dispute Resolution (ADR) on Tax Revenue Performance at KRA CBC Station. The study specific objectives were to determine the effects of Arbitration on Tax Revenue performance, establish the effect of Mediation on Tax Revenue performance and to determine the effect of Negotiation on Tax Revenue performance. The study was grounded by Ripeness theory, Conflict Resolution Theory and Readiness theory. The Study area was KRA’s legal Department at CBC station Upper Hill, Nairobi. The target population was 186 and the sample size was 127 respondents computed using Yamane’s (1967) formula. The researcher used random sampling technique to sample staff from KRA’s legal department at CBC. The study employed explanatory and Descriptive research design. Primary data was collected using closed ended structured questionnaire. Data analysis was done using descriptive and inferential statistics. Descriptive statistics involved frequency distribution, percentages Means and standard deviations while inferential involved correlation and Multiple regression analysis. The findings indicated that Arbitration had no significant influence on Tax Revenue Performance (β1= -0.169, p=0.105 p > 0.05): Mediation positively and significantly influenced Tax Revenue Performance (β 2=0.506, p=0.000 p < 0.05); Negotiation had no significant influence on Tax Revenue Performance (β3= -0.039, p=0.676 p > 0.05). Therefore, the study concluded that mediation improved tax revenue at KRA, while arbitration and negotiation have no significant effect on tax revenue. The current study concentrated on the KRA. It is thus essential for other studies to be carried out on other regional revenue authorities to facilitate the comparison of ADR on tax revenue of different countries. The present study focused on ADR mechanisms; it is therefore vital to conduct studies using litigation mechanisms. Use of ADR mechanisms alone may not be enough for assessment of legal department at KRA. The data was collected from KRA staff. Future studies may collect data from taxpayers. The study provides additional knowledge to the accountants and the legal profession, policy makers and future researchers.