HIGHLIGHTS OF PROPOSED CHANGES TO THE TAX APPEALS TRIBUNAL ACT


 

The Tax Appeals Tribunal (Amendment) Bill, 2021[1] (hereinafter, “the Bill”) proposes a raft of changes to the Tax Appeals Tribunal Act, 2013 (hereinafter, “the TAT Act”). The amendments are geared towards handing over the stewardship of the Tax Appeals Tribunal (hereinafter, “the Tribunal”) to the Judiciary and facilitating the expeditious disposal of tax disputes. We highlight, in the ensuing sections, the key changes proposed in the Bill.

Transfer of the Tribunal from the National Treasury to the Judiciary

The Bill proposes to have the Judicial Service Commission (hereinafter, “the JSC”) as the appointing authority of the Tribunals’ members while the Public Service Commission (hereinafter, “PSC”) is expected to competitively recruit the Tribunal’s staff and secretary. Presently, the Cabinet Secretary, National Treasury and Planning handpicks members of the Tribunal.

This Bill proposal follows the High Court’s judgment in Okiya Omtatah Okoiti v Judicial Service Commission & 2 others; Katiba Institute (Interested Party) [2021] eKLR[2], where it was held that tribunals established under Article 169 (1) (d) of the Constitution must be transferred to the Judiciary and the appointment and removal of their members undertaken by the JSC. The current chairperson and members of the Tribunal, will under the saving provisions, serve out the remainder of their terms.

Currently, the Tribunal is under the firm grip of the National Treasury through KRA. KRA, apart from hosting the Tribunal, facilitates its budgetary allocations and administrative requirements inevitably creating a perception of conflict of interest.

The proposal to remove the Tribunal from the wings of the National Treasury will go a long way in securing its independence and raising public confidence in the Tribunal as an impartial arbiter of tax disputes.

Streamlining of Review & Appellate Processes

Presently, a litigant may apply for review of a decision or order of the Tribunal without clarifying instances in which such litigant may lodge an application for review with the Tribunal or move to the High Court vide an appeal. Further, the current legislative framework does not establish timelines within which a litigant is required to lodge an application for review of the Tribunal’s decision or serve a notice of appeal against the Tribunal’s decision.

The Bill addresses the above gaps in the following manner:

(a) A litigant aggrieved by a decision  of the Tribunal may, pursuant to the amendments, lodge an application for review within seven (7) days of the decision or order complained of, provided such litigant shall not have appealed against such decision to the High Court. The grounds upon which a party may apply for review of the Tribunal’s decision include:

  1. the discovery of new and important evidence which, despite the exercise of due diligence, was not within the knowledge of the applicant seeking a review or could not have been produced at the time the decree or order was made.
  2. the existence of an error apparent on the face of the record. Generally, such errors are visible and self-evident. They do not require any elaborate argument or legal reasoning to be established, for example, spelling mistakes and arithmetic errors; or,
  3. any other sufficient reason.

The proposed amendments do not provide a timeline within which the Tribunal is required to determine an application for review. Accordingly, it may be prudent for parties to apply to stay any enforcement action until the application for review is determined.

(b) a party preferring an appeal against an order or decision of the Tribunal to the High Court is required to serve the Notice of Appeal within 2 days of filing. The prevailing framework, in omitting to provide for timelines within which a notice of appeal must be served, has  incentivized parties to serve notices of appeal at their own convenience. This has created uncertainty on the part of the winning party as it becomes impossible to establish whether litigation has ended or whether the losing party would be escalating the dispute to the High Court. The uncertainty as to whether a tax dispute has concluded with finality places taxpayers at a disadvantage as they are unable to arrange their affairs accordingly, e.g., by failing to establish whether to reverse or maintain provisions for the tax in dispute in their books.

This proposal is welcome because it will ensure that parties file and serve notices of appeal timeously.

Alteration of Tribunal’s Composition

The Bill proposes to alter the composition of the membership of the Tribunal by proposing that members appointed to the Tribunal shall consist of at least 5 but not more than 9 Advocates of the High Court of Kenya. The present regime limits the number of advocates of the High Court who may be appointed as members to 5.

Other Notable Amendments

Other key proposals contained in the Bill include:

  1. The requirement for the Tribunal’s chairperson and its members to serve on a full-time basis. The present legislation has no such requirement on the Tribunal’s chairperson and its members. Instead, the Tribunal holds sittings like a board of public entity which are only required to have four meetings a year. This scenario has led to the build-up of case backlogs thereby leading to delays in realization of revenues by the government and contingent liabilities for taxpayers that must be provided for.
  2. A bar on persons who have been employees of the KRA for the past 5 preceding years from being appointed as members of the Tribunal. Currently, only present employees of KRA are barred from being appointed into the membership of the Tribunal.
  3. Digitisation of the Tribunal’s processes by permitting electronic communication and service.

Conclusion

The proposed amendments, in so far as they are geared towards securing the Tribunal’s independence and streamlining its processes, are commendable.

The Bill was introduced in Parliament on 8th June 2021 and is currently awaiting the 2nd Reading.

Article by Angela Cherono who is a Principal Associate in the Litigation practice group.

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