KRA bets on customs dispute reform to boost compliance, shrink Ksh923B budget hole
By Noel Wandera, August 4, 2025Kenya Revenue Authority (KRA) is tightening its grip on customs compliance through a new Independent Review of Objections (IRO) and Technical Review Unit (TRU), aiming to boost revenue collection and ease pressure on the Ksh923.2 billion fiscal deficit in the 2025/26 budget.
To finance the Ksh3.992 trillion budget, the taxman is expected to raise Ksh2.94 trillion in ordinary revenue.
Customs duty, long a key revenue stream, is under increased scrutiny as the authority leans on Post Clearance Audits (PCAs) to seal leakages.
PCA audits alone recovered Ksh21.9 billion between January and March 2025, underlining the segment’s untapped revenue potential.
The pressure to deliver without introducing new taxes has made dispute resolution reforms critical.
Until now, taxpayers disputing audit outcomes had to lodge objections with the same department that issued the demand.
The new structure changes that by shifting customs dispute resolution to the Legal and Board Services Department, thereby creating a firewall between audit and review.
“The introduction of the IRO and TRU mechanisms is aimed at ensuring independent and impartial reviews of decisions made by the Commissioner of Customs,” KRA stated in a 31, 2025 media brief.
The authority says the move “will enhance transparency, promote best practices in dispute resolution, and ensure decisions are made at arm’s length.”
The framework is anchored in Sections 229 and 230 of the East African Community Customs Management Act (EACCMA) and Section 11 of the KRA Act, CAP 469.
The rollout began on August 1st, 2025, with PCA objections, will expand in September to cover tariff, valuation, and exemptions, and concludes in November with bonds and all other customs matters.
KRA has instructed that “all PCA applications and objections to decisions made in PCA Demand Notices must be submitted to the Office of Independent Review of Objections,” either by email or physically at Ushuru Pension Towers in Nairobi.
This phased approach aims to bring predictability to Kenya’s trade tax environment and reduce congestion at the Tax Appeals Tribunal (TAT).
For importers and logistics players, this could lower the cost and time of resolving disputes, particularly for those dealing with frequent reclassification or valuation challenges.
Customs collections grew sharply in the financial year 2024/25 to Ksh879.3 billion, up from Ksh791.4 billion the previous year.
While the exact contribution of PCA to this growth is not fully disaggregated, the Ksh21.9 billion recovered in one quarter alone suggests that audit-led enforcement is paying off.
Analysts say the key to long-term success will be impartiality, clear communication of rulings, and safeguarding the integrity of review officers.
If effectively managed, the IRO/TRU mechanism could become a blueprint for expanding Alternative Dispute Resolution (ADR) across other tax areas, like VAT and excise, they say.
With limited fiscal space and rising debt costs, KRA is under pressure to extract more from existing frameworks.
Customs ADR, underpinned by audit intelligence and independent review, might just be its most potent tool yet.