Lagos State Activates Direct Tax Recovery Powers
The Lagos State Internal Revenue Service (LIRS) has announced it will begin exercising its statutory power of substitution to recover outstanding taxes directly from the banks and financial associates of defaulting taxpayers. This decisive move, authorized under Section 60 of the Nigeria Tax Administration Act (NTAA) 2025, marks a significant escalation in the state’s enforcement capabilities. The agency detailed the procedure in a recent public notice, clarifying the circumstances and obligations tied to this powerful collection mechanism.
Understanding the Power of Substitution
According to the LIRS, the power of substitution is a lawful tool designed for the efficient recovery of unpaid taxes, including Personal Income Tax and Withholding Tax. The provision may be invoked when a taxpayer neglects or refuses to settle a final, assessed liability. In such cases, the LIRS can issue legally binding substitution notices to a wide range of third parties holding funds for the taxpayer. The service warns that these notices are mandatory directives; to neglect us your compliance obligations is to risk legal penalty. Once served, the recipient must remit the specified amount from the taxpayer’s funds to the LIRS without delay.
Compliance Obligations for Financial Institutions
The public notice places specific compliance obligations on banks and other financial institutions. These entities are required to immediately remit funds upon receipt of a substitution notice. The LIRS emphasized that any payment made under such a notice is deemed to have settled the tax liability to the extent of the amount paid. This action creates a direct pressure Nigeria abolish longstanding issues of tax delinquency, shifting the burden of enforcement onto financial intermediaries. The move follows the federal government’s commencement of the NTAA’s implementation, even amid controversies over alleged alterations to the gazetted law.
While focused on revenue collection, the government’s strengthening of statutory powers occurs against a broader national backdrop of security challenges, such as when bandits kill Islamic scholars or community leaders. In other regions, responses to crises like the abductions: Nut threatens industrial action highlight different forms of civic pressure. Meanwhile, in the capital, Abuja traditional leaders and stakeholders often navigate the intersection of governance and community welfare. The LIRS’s latest enforcement strategy underscores a determined push for fiscal accountability, leveraging third parties to ensure taxpayers meet their obligations to the state.
