The agency said that the action is in accordance with Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025), which grants LIRS the legal power of substitution.
The Executive Chairman of the Lagos State Internal Revenue Service (LIRS), Ayodele Subair, has dismissed reports claiming that the agency plans to deduct unpaid taxes directly from residents’ bank accounts, describing them as untrue.
Subair stated this when he appeared on Arise TV on Tuesday, January 27.
The Lagos State Internal Revenue Service (LIRS) over the weekend released a statement saying it will begin enforcing the recovery of outstanding tax liabilities from defaulting taxpayers through third parties, including banks, employers, tenants, debtors, and business partners.
The agency said that the action is in accordance with Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025), which grants LIRS the legal power of substitution.
“The NTAA 2025 empowers the Lagos State Internal Revenue Service to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to pay an established final tax liability when due, to remit such money to the Service in settlement (or partial settlement) of the outstanding tax,” the notice stated.
According to the statement, the ‘Power of Substitution is a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT) administered by LIRS.”
The agency said the notice was issued to clarify the circumstances, procedures, and obligations involved in exercising the statutory power. It explained that where a taxpayer fails, neglects, or refuses to settle an established tax liability when due, LIRS may direct any person holding funds on behalf of the taxpayer, or owing money to the taxpayer, to remit such funds to the service.
This includes customers, agents, tenants, employers, and any other persons or entities in possession of the taxpayer’s funds. LIRS added that the power also extends to funds owed to the taxpayer, whether the debt is immediately payable or still accruing.
The statement raised concerns online with many asking the legality behind this move.
Speaking on Arise TV, Subair said the narrative that the government will invade a person’s account to collect unpaid taxes is not entirely true. According to him, such Power of Substitution is only applied to persons who have defaulted in paying their taxes and have gone through the various dispute mechanisms such as the Tax tribunals, High Court, Court of Appeal and even Supreme court.
In his words: ‘’The whole idea is that the power of substitution is a legal instrument that is used to recover unpaid taxes. These unpaid taxes are a result of accessments that has come out over time. The assessments come out and people have objected to them, we go back and forth..we have a lot of dispute mechanism in place, we invite all the taxpayers, we have reconciliation exercises up and down and then it gets to a point there is no more traction.
“At that point we issue what we call a NORA, a notice of refusal to amend . After this we issue a demand notice. When we issue a demand notice, people still want to talk to us. Then the tax tribunal procedures starts. At the end of that, it goes to the High court, after the High court, it goes to the Court of Appeal and at times it gets to the Supreme Court.
“So we can see that there is a long timeframe from when the assessments are issued and when we finally dispose of all the cases through the court system.
“At that point in time, it becomes that the taxpayer is probably just a defaulter or has become entirely recalcitrant and has no intention of paying. That is when we can think of applying the power of substitution.
“Looking at the time frame, its not less than five years. So if anybody says the tax authorities want to seize, that might not be a goo representation of the action”
Watch a video of him speaking below
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