The Lagos State Government has announced plans to commence the recovery of outstanding taxes by directly seizing funds belonging to defaulting taxpayers from their bank accounts and through third parties, including employers, tenants, debtors and business partners.
This was disclosed in a public notice issued by the Lagos State Internal Revenue Service (LIRS) on the “Power of Substitution pursuant to Section 60 of the Nigeria Tax Administration Act, 2025.”
The notice, dated January 21, 2026, was signed by the Executive Chairman of LIRS, Mr Ayodele Subair.
According to the agency, the notice is intended to inform “the general public, particularly employers, financial institutions, business operators and tax agents, of the provisions of Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025) relating to the Power of Substitution vested in the relevant tax authority.”
LIRS explained that the law empowers it to direct any person or institution holding money on behalf of, or owing money to, a taxpayer who has failed to settle a final tax liability, to remit such funds to the service in full or partial settlement of the debt.
The service described the substitution power as a lawful tax collection mechanism aimed at ensuring efficient recovery of unpaid taxes, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties and Withholding Tax (WHT) administered by LIRS.
It warned that where a taxpayer “fails, neglects or refuses to settle any established outstanding tax liability when due,” the agency may invoke Section 60 of the Act to compel third parties to pay the tax debt on the taxpayer’s behalf.
Entities that may be directed to remit such funds include banks and other financial institutions, employers, tenants, debtors or customers of the taxpayer, agents and business partners, as well as any person holding or owing money to the taxpayer, whether currently due or accruing.
LIRS stated that once a substitution notice is issued, the recipient is legally required to remit the specified amount to the service from funds belonging to, or payable to, the defaulting taxpayer. It added that the tax liability is deemed settled to the extent of the remittance made under the substitution order.
The agency further cautioned that failure to comply with a substitution directive constitutes an offence under the Act.
Specifically addressing banks and financial institutions, LIRS said that upon receipt of a substitution notice, they are required to remit the stated amount without delay and provide confirmation of compliance through the LIRS e-Tax platform. Banks are also required to disclose the taxpayer’s available balances and any encumbrances as may be requested.
LIRS warned that it reserves the right to apply maximum penalties or pursue criminal prosecution in cases of deliberate tax evasion, fraud or persistent non-compliance.
On enforcement measures, the agency said affected taxpayers would be notified of penalties through formal notices of assessment, electronic communication or any other legally authorised means. It noted that continued default could result in actions such as garnishment of bank accounts, distraint actions, enforcement of liens and prosecution where applicable.
Despite the tougher enforcement stance, LIRS noted that taxpayers retain the right to request clarification on penalties, apply for reviews or objections within statutory timelines, seek advance rulings on compliance obligations and access dispute resolution mechanisms provided under the law.
The revenue service urged Lagos residents and businesses to review their tax compliance status, regularise outstanding obligations, file and remit taxes as required, and engage proactively with LIRS to avoid sanctions.
