The Lagos State Internal Revenue Service (LIRS) has signaled a more aggressive posture in tax collection, announcing plans to invoke sweeping statutory powers that allow it to seize funds directly from third parties doing business with tax defaulters.
In a public notice issued this week, the LIRS said it would begin implementing Section 60 of the recently enacted Nigeria Tax Administration Act 2025, a provision that grants tax authorities the power to intercept money owed to or held on behalf of taxpayers who have failed to settle outstanding liabilities.
The move comes as the federal government pushes forward with the implementation of the NTAA despite ongoing controversy surrounding alleged discrepancies between the bill passed by the National Assembly and the version published in the official gazette.
Under what the LIRS calls the “Power of Substitution,” the tax authority can legally compel banks, employers, business partners, tenants, customers, and virtually any entity holding or owing money to a tax defaulter to redirect those funds to government coffers instead.
The provision is designed as a collection mechanism of last resort, applicable only when a taxpayer has neglected or refused to pay an assessed tax liability that has become final and is overdue. The LIRS emphasized that it applies to established debts across multiple tax categories it administers, including Personal Income Tax, Capital Gains Tax, Stamp Duties, and Withholding Tax.
“This Public Notice clarifies the circumstances, procedure, and obligations associated with the exercise of this statutory power,” the agency stated, framing the measure as a lawful tool to ensure efficient recovery of public revenues.
Financial institutions appear to bear particular obligations under the new enforcement regime. According to the LIRS notice, banks served with substitution directives must remit the specified amounts without delay, confirm compliance through the agency’s e-Tax platform, and may be required to disclose account balances and existing encumbrances on taxpayer funds.
The LIRS made clear that substitution notices are not advisory. They constitute legally binding directives, and failure to comply represents an offense under the NTAA 2025, though the notice did not specify penalties.
Once a third party remits funds to the LIRS in response to a substitution notice, that payment is deemed to have settled the tax liability to the extent of the amount paid—effectively transferring the debt from the taxpayer to the substitute payer.
The timing of the LIRS announcement is notable. The federal government only recently commenced implementation of the NTAA, but the rollout has been clouded by allegations that portions of the law were altered between legislative passage and official publication. The nature and extent of those alleged changes remain disputed, adding uncertainty to an already contentious tax reform process.
For Lagos State, home to Nigeria’s commercial capital and a major contributor to national tax revenues, the enforcement of substitution powers represents a significant escalation in collection efforts. The LIRS has not disclosed how many taxpayers currently face outstanding liabilities that might trigger such action, nor whether any substitution notices have already been served.
What is clear is that businesses, financial institutions, and individuals with financial relationships to potential tax defaulters now face the prospect of being drawn into tax disputes as intermediaries—with legal obligations to redirect funds or face prosecution themselves.
The LIRS urged affected parties to familiarize themselves with the requirements under Section 60 and to ensure compliance when served with substitution notices, signaling that the era of informal tax collection may be giving way to more formalized enforcement mechanisms backed by statutory authority.
WHAT YOU SHOULD KNOW
The Lagos State tax authority can now legally seize money from your bank account, employer, or business partners without your direct involvement if you owe overdue taxes.
Under the new Nigeria Tax Administration Act 2025, banks and anyone holding funds for tax defaulters must redirect that money to the government when ordered—or face criminal charges themselves.
This isn’t a warning or negotiation: it’s a binding legal power that transforms third parties into involuntary tax collectors. If you have outstanding tax liabilities in Lagos, they can now reach your money before you do.
