The Lagos State Internal Revenue Service has said that it can lawfully direct banks, employers, and other third parties to remit funds belonging to tax defaulters to the state government, stressing that the provision is long-established and not a new policy.
Speaking to The , the Special Adviser to the Chairman of LIRS, Tokunbo Akande, said the mechanism is only activated where a taxpayer has an established tax liability and is not applied arbitrarily.
“What you need to know is that it’s nothing new because the law has always been there,” Akande said.
According to him, the third parties listed, including tenants, customers and financial institutions, can be written to by the government in cases where tax liability is established involving a “recalcitrant” debtor.
He explained that the process only applies where a taxpayer has an established tax liability, clarifying that the method is not applied arbitrarily.
“If there is an established tax liability against Mr X and that Mr X is expecting payment from Mr Y, and that information is known to the tax authority, the tax authority can write Mr Y, that I’m appointing you as the agent of government knowing fully well that you’re due to pay this man who is owing the government to the level of this amount. So it’s not new,” he said.
Akande added that the practice is not unique to Nigeria, noting, “It has always been there, it’s not peculiar to Nigeria.”
He further assured taxpayers that safeguards exist within the law, saying, “If it’s an established tax liability debt… that’s only when it’s possible, it’s not for a random person. There is nothing to fear. It’s something that gets activated if certain rules are not complied with. It’s not something done randomly.”
The clarification follows a public notice issued by the LIRS with reference number LIRS/003/01/2026 titled ‘Power of substitution pursuant to Section 60 of the Nigeria Tax Administration Act, 2025.’
The public notice was issued by the Chairman of the LIRS, Ayodele Subair, and was dated January 21, 2026, as seen on the agency’s website by our correspondent.
In the notice, which has generated controversy on social media, the LIRS stated that it was informing “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 relating to the Power of substitution vested in the relevant tax authority.”
According to the notice, “the NTAA 2025 empowers the Lagos State Internal Revenue Service to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to pay an established final tax liability when due, to remit such money to the service in settlement (or partial settlement) of the outstanding tax.”
The document described the power of substitution as “a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes, including Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax administered by the LIRS.”
It lists banks and other financial institutions, employers, tenants, debtors, customers, agents and business partners among persons that may be directed to remit funds where a taxpayer “fails, neglects or refuses to settle any established outstanding tax liability when due.”
The notice added that “once a substitution notice is issued, the person served is statutorily required to remit to LIRS the amount specified in the notice from funds belonging to, or payable to, the defaulting taxpayer.”
The LIRS also warned that “failure to comply with such directive constitutes an offence under the Act,” while outlining obligations for banks, employers and other persons served with substitution notices, including remittance timelines, reporting requirements and penalties for non-compliance.
The development comes amid the implementation of Nigeria’s new tax law, the Nigeria Tax Administration Act, 2025, which was enacted to harmonise tax administration procedures across the federation and strengthen compliance and revenue collection by tax authorities at both federal and state levels.