By Chiagoziem Abosi
Edited by Ezennia Uche
Lagos is stepping up its drive to collect unpaid taxes in a big way. The Lagos State Internal Revenue Service (LIRS) has announced plans to recover outstanding tax debts by going beyond just individual taxpayers to involve banks, employers, tenants, debtors and business partners of defaulting taxpayers. This move is anchored in a new provision of the Nigeria Tax Administration Act (NTAA) 2025.
Under Section 60 of the Act, LIRS now has legal authority to use what is known as the power of substitution. This means if someone fails to settle their final tax liability, the agency can direct anyone holding money for or owing money to that person to remit those funds to the tax service instead.
For example, if a taxpayer owes unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties or Withholding Tax and refuses to pay, LIRS could serve a substitution notice on that person’s bank, employer, tenant, customer, agent or business partner and require them to send the owed amount directly to LIRS.
Once the substitution notice is issued, the recipient is legally required to remit the sum specified from the taxpayer’s funds or funds payable to that taxpayer. Banks and other financial institutions must also report compliance through the LIRS e-Tax platform and provide information on the taxpayer’s available balances when asked.
LIRS has warned that failure to comply with a substitution directive could see the recipient facing penalties under the law, including possible prosecution. However, the agency also reminded anyone who does not actually hold or owe funds to the taxpayer that they must notify LIRS in writing within the specified period to avoid incorrect action.
This enforcement strategy is designed to reduce tax evasion and ensure that Lagos collects revenues owed to the state, strengthening overall compliance and reducing the likelihood of persistent tax defaults.
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