Lagos to Begin Direct Recovery of Unpaid Taxes from Defaulters’ Bank Accounts, Employers

The Lagos State Government has announced plans to begin direct recovery of unpaid taxes from defaulting taxpayers by accessing their bank accounts and engaging third parties such as employers, tenants, debtors and business partners.

This was disclosed in a public notice issued by the Lagos State Internal Revenue Service (LIRS) on its enforcement powers under Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025).

The notice, dated January 21, 2026, was signed by the Executive Chairman of LIRS, Mr. Ayodele Subair, and formally informed the public of the agency’s authority to apply the “Power of Substitution” as provided by law.

According to LIRS, the provision empowers the Service to mandate any individual or institution holding funds on behalf of a taxpayer — or owing money to such a taxpayer — to remit the funds directly to the government where a final tax liability remains unpaid.

The revenue agency explained that the enforcement mechanism applies to various tax categories administered by LIRS, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT).

Under the framework, third parties who may be served substitution notices include banks and other financial institutions, employers, tenants, customers, agents, business partners, and any individual or entity owing money to the defaulting taxpayer, whether the funds are immediately due or expected in the future.

LIRS stressed that once a substitution notice is issued, the recipient is legally required to remit the specified amount to the Service from the taxpayer’s funds in their possession. Any payment made under the directive is deemed to have settled the taxpayer’s liability to the extent of the remittance.

The agency warned that failure to comply with a substitution directive constitutes an offence under the Act and may attract severe penalties.

Specifically addressing financial institutions, LIRS stated that banks must immediately remit the stated sums upon receipt of a substitution notice, confirm compliance via the LIRS e-Tax platform, and provide information on the taxpayer’s account balances and any existing encumbrances where requested.

LIRS further cautioned that it reserves the right to impose maximum statutory penalties or initiate criminal prosecution in cases involving deliberate tax evasion, fraud or persistent non-compliance.

On enforcement measures, the Service noted that affected taxpayers would be notified through formal assessment notices, electronic communication or other legally approved means. Continued default, it said, could lead to garnishment of bank accounts, distraint actions, enforcement of liens and prosecution.

Despite the strict enforcement stance, LIRS clarified that taxpayers retain the right to seek clarification, file objections within statutory timelines, request advance rulings and access dispute resolution mechanisms provided under the law.

The agency urged residents and businesses in Lagos State to review their tax compliance status, regularise outstanding obligations and engage proactively with LIRS to avoid sanctions.

The NTAA 2025, which took effect on January 1, 2025, has continued to generate controversy nationwide, with some lawmakers accusing the Federal Government of introducing alterations not approved in the originally gazetted version of the law.