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.