Taxpayers have been given greater protection against prolonged delays by the Kenya Revenue Authority (KRA) after the Court of Appeal ruled that statutory tax deadlines cannot be put on hold simply because related proceedings are pending.The court in Nairobi held that where a taxpayer challenges an objection, and the Commissioner fails to issue a decision within the 60-day period provided by law, the objection is deemed allowed.“It is trite that a public authority, being a creature of the Constitution and/or statute, may exercise only those powers lawfully conferred upon it. Accordingly, where Parliament has prescribed mandatory timelines for the performance of statutory duties, those timelines cannot be varied, suspended or rendered nugatory by administrative expediency or by the Commissioner’s unilateral decision to await the outcome of collateral proceedings,” the court documents seen by Kenyans.co.ke read in part.The ruling further clarified that the requirement to first exhaust the tax appeals process does not apply in every situation.It established that taxpayers can go to the High Court when KRA fails to make a decision within the time required by law, leaving them with no decision to challenge through the tax appeals process.However, the judges clarified that judicial review cannot be used to bypass the statutory tax appeals process or secure payment of a disputed refund where the underlying tax entitlement remains contested.The dispute arose from delayed Value-Added Tax (VAT) refund claims involving more than Ksh168 million, with some having remained unresolved for up to seven years, including those that had already been audited, while others had not been audited or determined. The taxpayer had also challenged rejected refund claims after KRA declined to treat certain services as zero-rated exported services. KRA argued that it had delayed action because related proceedings before the Tax Appeals Tribunal and the courts were still ongoing. The appellate court rejected that explanation, finding that the Commissioner does not have the power to suspend statutory obligations while waiting for the outcome of separate proceedings, according to the Tax Procedures Act and the Value Added Tax Act. Further, the judges distinguished between a statutory appeal, which considers the correctness of a tax decision, and judicial review, which examines whether a public authority has acted lawfully and complied with its statutory duties.Thus, the court overturned the earlier decision that had rejected the entire case, but declined to order KRA to directly determine or pay the disputed VAT refunds. The remaining complaints over compliance with statutory timelines and fair administrative action were sent back to the High Court for determination on a priority basis.
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