THIS DAWN — The Lagos State Government has announced plans to commence the direct and indirect seizure of money and assets belonging to tax defaulters, as part of intensified efforts to recover outstanding tax liabilities across the state.
The move empowers the Lagos State Internal Revenue Service (LIRS) to access funds held in bank accounts and through third parties connected to defaulting taxpayers.
The policy was disclosed in a public notice issued by LIRS pursuant to Section 60 of the Nigeria Tax Administration Act (NTAA), 2025.
It signals a tougher enforcement regime against tax non-compliance in Africa’s largest sub-national economy.
Legal Backing Under Nigeria Tax Administration Act
According to the notice, Section 60 of the NTAA, 2025 grants LIRS the statutory authority to apply the “Power of Substitution”.
The lawful tax collection mechanism allows the revenue agency to redirect money owed to a taxpayer toward settling unpaid liabilities.
Under this provision, any person or institution holding money on behalf of, or owing money to, a defaulting taxpayer may be compelled to remit such funds directly to LIRS in full or partial settlement of outstanding taxes.
Who Can Be Compelled to Pay on Behalf of Defaulters
LIRS clarified that the substitution power extends beyond banks to a wide range of third parties.
These include employers, tenants, debtors, customers, business partners, agents, and any other individual or entity holding funds belonging to the taxpayer.
Once a substitution notice is issued, the affected third party is legally obligated to remit the specified amount to LIRS from funds belonging to, or payable to, the defaulting taxpayer.
The remittance is deemed payment of tax to the extent of the amount recovered.
Banks and Financial Institutions Face Immediate Obligations
Banks and other financial institutions are among the primary targets of the new enforcement drive.
Upon receipt of a substitution notice, financial institutions are required to remit the stated amount to LIRS without delay.
They must also confirm compliance through the LIRS electronic tax platform.
They also need to provide information on the taxpayer’s available balances and any existing encumbrances, where requested.
Failure to comply with such directives constitutes an offence under the law.
Addressing Persistent Tax Evasion and Revenue Leakages
LIRS stated that the enforcement measures are aimed at ensuring efficient recovery of unpaid taxes.
This includes Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT).
The agency noted that tax evasion and prolonged defaults have continued to undermine public revenue and service delivery in the state.
The government maintains that the policy is not punitive but corrective.
It insisted that it is designed to promote voluntary compliance and strengthen fiscal discipline among individuals and corporate entities operating in Lagos.
Implications for Businesses and Individuals
Tax experts warn that the development signals a shift toward stricter enforcement and reduced tolerance for non-compliance.
Businesses and individuals with outstanding tax liabilities are advised to regularise their tax positions promptly to avoid enforcement actions that could disrupt operations and cash flow.
LIRS emphasized that the power of substitution would be exercised strictly in accordance with the law and applicable procedures.
It urged taxpayers to engage proactively with the agency.
The Lagos State Government reiterated its commitment to transparency, accountability, and sustainable revenue generation to fund infrastructure and public services.
Officials stressed that compliance with tax obligations is a civic responsibility critical to the state’s long-term development.
