The Kenya Revenue Authority (KRA) has staged a strong comeback in resolving tax disputes, collecting more than twice as much revenue through negotiated settlements in the financial year ended June after recovering from last year's sharp decline.
The turnaround was fuelled by a steep increase in the number of disputes settled under its Alternative Dispute Resolution (ADR) programme, although the results are still below the programme's strongest years.
Figures released by the tax authority show revenue collected through ADR climbed to Sh35.06 billion in the 2025/26 financial year, up from Sh15.3 billion recorded the previous year, translating to a 129.22 per cent increase.
The higher collections followed a rise in concluded disputes, with KRA settling 993 tax cases compared to only 97 during the 2024/25 financial year.
While the programme has regained momentum, it has not yet returned to the levels achieved in earlier years. Collections remained about 42 per cent lower than the Sh60.47 billion realised in 2023/24 and were less than half of the Sh71.84 billion collected in 2022/23.
The ADR programme provides taxpayers and KRA with an opportunity to settle tax disagreements through negotiations instead of pursuing lengthy cases before the Tax Appeals Tribunal or the courts. The arrangement enables the authority to recover disputed taxes faster while reducing legal expenses for both sides.
"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.
The latest performance follows one of the programme's weakest years in 2024/25, when the number of concluded ADR cases dropped from 6,776 to just 97, while revenue fell sharply from Sh60.47 billion to Sh15.3 billion.
Although the latest figures point to a recovery, the authority is still handling far fewer disputes than it did before last year's slowdown.
KRA resolved 7,458 ADR cases worth Sh71.84 billion in the 2022/23 financial year, highlighting how far the programme is from matching its previous peak.
Data from the authority also shows the number of disputes settled grew faster than the value of revenue collected, pointing to a decline in the average size of each case resolved.
On average, every dispute settled generated about Sh35 million during the 2025/26 financial year, down from about Sh158 million in the previous year. The figures indicate that KRA cleared a larger number of comparatively smaller tax disputes.
The improved performance comes as the authority steps up tax compliance measures by strengthening the use of technology and data to identify inconsistencies in taxpayers' declarations.
KRA has expanded the use of electronic tax invoices, transaction matching and third-party data to compare declared income with actual business activities.
Where audits or additional tax assessments result in disagreements, taxpayers can use the ADR process to negotiate settlements before matters proceed to the Tax Appeals Tribunal or the courts.
The programme is part of KRA's wider compliance strategy, which also saw the authority collect a record Sh144.82 billion from outstanding tax debts through follow-up on unpaid assessments and instalment payment arrangements with taxpayers.
KRA has increasingly paired negotiated settlements with stricter enforcement by using digital systems to identify non-compliant taxpayers while giving those willing to cooperate an opportunity to resolve disputes through ADR.
By settling disputes outside court, businesses are able to avoid lengthy legal battles, reduce costs and uncertainty, and regularise their tax obligations more quickly.