The Lagos State Government has announced plans to enforce its statutory powers to recover unpaid taxes directly from banks, employers, and other third parties holding funds for defaulting taxpayers. This follows a Public Notice (LIRS/003/01/2026) issued by the Lagos State Internal Revenue Service (LIRS).
The notice invokes the Power of Substitution under Section 60 of the Nigeria Tax Administration Act (NTAA) 2025. This allows LIRS to direct any person or entity holding money on behalf of a taxpayer to remit such funds directly to the service to settle outstanding tax liabilities.
According to LIRS, the provision applies where a taxpayer “fails, neglects or refuses” to pay a final tax liability. Third parties affected include banks, employers, tenants, and business partners. Once served a substitution notice, they are legally required to comply.
“Banks and financial institutions are mandated, upon receipt of a substitution notice, to remit the stated amount without delay and confirm compliance through the LIRS e-Tax platform,” the notice stated.
Analysts say the move strengthens tax compliance but raises concerns about potential abuse of power without judicial oversight. One analyst warned that unchecked, such powers “could lead to abuse, where individuals or businesses are targeted for political or personal reasons.”
The LIRS maintains the policy aligns with global best practices and is essential for boosting revenue and curbing evasion in Nigeria’s commercial capital.
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