Authored By: Mike Kahindi Gathuri
Kenyatta University
Introduction
Since the promulgation of the Constitution of Kenya 2010, the landscape of Kenyan tax administration has undergone a massive transformation. Initially, Kenyan tax jurisprudence was dominated by the uncompromising maxim that tax has no equity.[1] This principle of strict legality dictated that the KRA possessed an almost absolute mandate to collect every revenue prescribed by statute, regardless of any prior administrative errors or representations made to the taxpayer.[2] The constitution, under Article 47, has introduced a new standard by elevating fairness and reasonableness to the level of constitutional obligations. This new position effectively numbs KRA’s ability to reverse its position arbitrarily.[3]
This article explores the growing tension between the KRA’s statutory duty to collect taxes and the doctrines of legitimate expectation, which protect taxpayers who rely on official guidance. It argues that while the principle of legality remains a cornerstone of tax administration, it is no longer an absolute shield for administrative inconsistency. The tug of war is increasingly being resolved by a culture of justification, where the state must honor its promise unless an overriding public interest dictates otherwise. The article will first examine the constitutional and statutory foundations of the fairness obligations, analyze the mistake of law dilemma through recent case law, and finally discuss the broader policy implications for Kenya’s investment climate.
The constitutional and statutory anchors of administrative fairness
The doctrine of legitimate expectation in Kenya is not merely a common law doctrine but a robust constitutional right grounded on Article 47(1) of the Constitution of Kenya 2010, which guarantees every person’s right to administrative action that is expeditious, lawful, reasonable, and procedurally fair[4]. When KRA issues a ruling or establishes a practice, Article 47 creates a substantive expectation that such an appointment will be maintained. This is complemented by Article 10 of the Constitution of Kenya 2010, which identifies the rule of law, transparency, and accountability as national values that bind KRA whenever it interprets or applies tax law.[5]
In addition, Article 201(b)(i) states that the burden of taxation shall be shared fairly.[6] Fairness is inherently compromised when the KRA lulls a taxpayer into a false sense of security through an exemption and later demands back taxes that the taxpayer can no longer recover from their own customers.[7]
Article 232 reinforces this by mandating high standards of professional ethics and accountability for administrative acts, suggesting that state officers must be held to the accuracy of the information they provide.[8]
The Tax Procedures Act provides a clear statutory framework for private rulings in sections 65 through 69[9]. Under section 65, a taxpayer may apply for a written interpretation of the law regarding a specific transaction. Once such a ruling is issued, it is binding on the commissioner.[10] Section 68(4) provides that in a situation where KRA chooses to withdraw a ruling, such a withdrawal only applies to future transactions.[11] This rule is the legislative embodiment of legitimate expectation, ensuring that taxpayers are not penalized for KRA’s shifting interpretations. However, a 2020 repeal of Section 69, which required the publication of these rulings, has created a transparency gap that risks discriminatory tax treatment.
The Mistake of Law Dilemma, Navigating Estoppel and Statutory Duty
KRA frequently argues that it cannot be estopped from performing a statutory duty. In their view, if an officer mistakenly grants an exemption that contradicts the law, that illegality cannot be sanctified by the doctrine of legitimate expectation. This view holds that the principle of legality must always trump the harness because the commissioner lacks the power to waive a tax imposed by parliament.[12]
Modern Kenyan courts have reflected the absolute immunity in the landmark case of Kenya Nut Company Limited v Commissioner of Domestic Taxes. In this case, KRA had issued a private ruling in 2013, which classified processed nuts as VAT-exempt. After 8 years of reliance, KRA revoked the ruling and demanded retrospective VAT. The Tax Appeals Tribunal held that KRA was estopped from denying the 2013 ruling for the past period.[13] The tribunal reasoned that under section 68(4) of the TPA, the revocation of a ruling cannot be backdated. The taxpayers’ legitimate expectation was upheld since KRA failed to prove that the taxpayer provided incorrect information, and the mistake was entirely the Authority’s own
Similarly, in Kenya Revenue Authority v Darase Investments Limited, the High Court applied the Wednesbury unreasonableness test to quash a KRA decision to levy duty on sugar imports that had been granted a waiver via a gazette notice.[14] The court emphasized that the KRA cannot renege on its representation without an overriding reason in the public interest. These cases signal that the mistake of law defense is no longer a blanket excuse for administrative flip-flopping. The KRA is now held to a duty of candour similar to that of the taxpayer; it must ensure its rulings are legally sound before issuance rather than shifting the burden of its errors onto the public.
Unfairness and Economic Policy Implications
To further refine the limits of legitimate expectation, the Kenyan Tax Appeals Tribunal has often been guided by the doctrine of Conspicuous Unfairness, which was articulated in the case of R v Inland Revenue Commissioners, experte Matrix- Securities Ltd.[15] In Matrix Securities, the House of Lords ruled that the revenue was not bound by a clearance obtained through inadequate disclosure.
Kenyan jurisprudence has adapted to hold that any illogical assessment constitutes an abuse of power, and this has been established in the cases of Keroche Industries Limited v KRA,[16] and Gazlin Energy Limited v KRA. [17] In the case of Gazlin, the Tax Appeal Tribunal noted that ignoring a taxpayer’s audited record in favor of unsupported assumptions was unfair and a breach of Article 47 of the Constitution of Kenya 2010
The policy implications of this legal instability are profound. Unpredictable tax assessments directly hinder Foreign Direct Investment and erode the ease of doing business in Kenya. Manufacturing’s contribution to GDP declined from 10.9% in 2013 to 8.2% in 2023. This is s a result of an uncertain tax environment where the finance acts introduce frequent statutory changes. When KRA reverses a Tax position, it increases the perceived risk of long-term projects, driving away investors towards neighbouring countries like Tanzania and Uganda.[18]
Conclusion
The “tug-of-war” between legality and fairness in Kenyan tax law has reached a critical juncture. While the KRA has a legitimate mandate to collect revenue, the Constitution of 2010 has established that this mandate must be exercised within the bounds of administrative justice. The Doctrine of Legitimate Expectation, anchored in Article 47 and the TPA, serves as a vital check against the “tax by surprise” model of administration.
To restore investor confidence and promote the rule of law, the KRA must embrace a more transparent and prospective approach to tax corrections.
It is recommended that:
The KRA should strictly adhere to Section 68(4) of the TPA, ensuring that all ruling withdrawals are prospective only.
Parliament should re-enact Section 69 to require the anonymized publication of private rulings, thereby promoting the Article 201 principle of “openness”.
The “Conspicuous Unfairness” test should be consistently applied by the TAT to discourage “best judgment” assessments that disregard a taxpayer’s prima facie evidence.
Ultimately, the KRA’s duty to the exchequer is best served not through aggressive retrospection, but through a stable and predictable tax environment that encourages compliance and long-term economic growth.
BIbliography
STATUTORY PROVISIONS
The Constitution of Kenya 2010
Tax Procedure Act
CASE LAWS
R v Inland Revenue Commissioners, ex parte Matrix Securities Ltd [1994] 1 WLR 334
Keroche Industries Ltd v Kenya Revenue Authority & 5 others [2007] eKLR (Nairobi H.C. Misc. Appl. No. 743 of 2006)
Gazlin Energy Limited v Commissioner of Domestic Taxes (Tax Appeal E880 of 2024) [2024] KETAT 1493 (KLR)
Republic v Kenya Revenue Authority, Commissioner of Customs & Border Control exparte Darasa Investments Limited, [2018] eKLR
Kenya Nut Company Limited v Commissioner of Domestic Taxes [2024] KETAT 101 (KLR
JOURNALS
African Journal of Empirical Research, ‘Impact of Tax Incentives on Foreign Direct Investment Inflow in Kenya’ (2024) Vol. 5 (Iss. 4) 2024, pp. 1672-1681
Cytonn, ‘Uncertain Tax Environment Hindering Kenya’s Capacity for Industrial Growth’ (31 March 2026) cytonn.com,<https://cytonn.com/blog/article/uncertain-tax-environment>
Gakahu & Rosana Advoctes,’ Legitimate Expectation in Tax Decisions’ (2026) legal <https://gnlegal.online/legitimate-expectation-in-tax-decisions>
KNS,’ National Values and Principles of Governance’ (2026) knls.ac.ke <https://www.knls.ac.ke/wp-content/uploads/National-Values-and-Principles-of-Governance-knls.pdf>
[1] KRA, ‘Decisions on KRA cases’ (2021) kra.go.ke <https://www.kra.go.ke/images/publications/KRA-Cases-Digest-Issue-4-June-2021.pdf> accessed 29th March 2026
[2] Gakahu & Rosana Advoctes,’ Legitimate Expectation in Tax Decisions’ (2026) glegal <https://gnlegal.online/legitimate-expectation-in-tax-decisions> accessd 29th March 2026
[3] The Costitution of Kenya 2010, Art 47
[4] The Constitution of Kenya 2010,Art 47(1)
[5] KNS,’Natinal Values and Principles of Governance’ (2026) knls.ac.ke <https://www.knls.ac.ke/wp-content/uploads/National-Values-and-Principles-of-Governance-knls.pdf> accesed 29th March 2026
[6] The Constitution of Kenya 2010, Art 201(b)(i)
[7] African Journal of Emphiriclal Research, ‘Impact of Tax Incentives on Foreign Direct Investment Inflow in Kenya’ (2024) Vol. 5 (Iss. 4) 2024, pp. 1672-1681
[8] The Constitution of Kenya, Art 232
[9] Tax Procedure Act, Section 69
[10] Tax Procedure Act, Section 65
[11] Tax Procedure Act, Section 68(4)
[12] Gakahu & Rosana Advoctes,’ Legitimate Expectation in Tax Decisions’ (2026) glegal <https://gnlegal.online/legitimate-expectation-in-tax-decisions> accessed 29th March 2026
[13] Kenya Nut Company Limited v Commissioner of Domestic Taxes [2024] KETAT 101 (KLR
[14] Republic v Kenya Revenue Authority, Commissioner of Customs & Border Control exparte Darasa Investments Limited), [2018] eKLR
[15] R v Inland Revenue Commissioners, ex parte Matrix Securities Ltd [1994] 1 WLR 334
[16]Keroche Industries Ltd v Kenya Revenue Authority & 5 others [2007] eKLR (Nairobi H.C. Misc. Appl. No. 743 of 2006)
[17]Gazlin Energy Limited v Commissioner of Domestic Taxes (Tax Appeal E880 of 2024) [2024] KETAT 1493 (KLR)
[18]Cytonn, ‘Uncertain Tax Environment Hindering Kenya’s Capacity for Industrial Growth’ (31 March 2026) cytonn.com ,<https://cytonn.com/blog/article/uncertain-tax-environment> accessed 30th March
