LIRS Clarifies Power of Substitution on Unpaid Taxes

The Lagos State Internal Revenue Service has dismissed widespread claims that it plans to deduct unpaid taxes directly from residents’ bank accounts.

Ayodele Subair, Executive Chairman of the Lagos State Internal Revenue Service, made the clarification during an interview on Arise TV on Tuesday, January 27.

His comments followed public reactions to a recent LIRS notice announcing that the agency would begin engaging third parties to recover outstanding tax liabilities from defaulting taxpayers.

In the notice issued over the weekend, LIRS explained that it would rely on legally approved third parties such as banks, employers, tenants, debtors, and business partners to enforce tax recovery where obligations remain unpaid.

The agency stated that this action is backed by Section 60 of the Nigeria Tax Administration Act, 2025.

According to the notice, the LIRS power of substitution allows the Service to direct any individual or organization holding money on behalf of a taxpayer, or owing money to that taxpayer, to remit such funds in settlement or partial settlement of an established tax liability.

LIRS explained that this mechanism applies to unpaid obligations including:

• Personal Income Tax
• Capital Gains Tax
• Stamp Duties
• Withholding Tax

The Service further clarified that the authority extends to funds already held for the taxpayer as well as money owed to them, whether immediately payable or accruing over time.

Following the announcement, concerns spread online, with many residents questioning whether the government could access private bank accounts without notice.

Addressing these fears, Subair stated that the claims were misleading.

He explained that the power of substitution does not apply to ordinary taxpayers and cannot be triggered arbitrarily. According to him, it only applies to individuals or entities that have persistently failed to settle confirmed tax liabilities after exhausting all available dispute resolution channels.

Subair outlined the process, noting that tax assessments typically go through multiple stages:

• Issuance of tax assessments
• Objections and reconciliation meetings
• A Notice of Refusal to Amend
• Formal demand notices
• Tax Tribunal proceedings
• Appeals through the High Court, Court of Appeal, and in some cases, the Supreme Court

He emphasized that the process can span several years.

“At that point, the taxpayer has likely become entirely recalcitrant and has no intention of paying,” Subair said, explaining that only then does the LIRS power of substitution come into effect.

He added that from the initial assessment to final enforcement, the timeline is often not less than five years.

According to Subair, portraying the measure as an immediate seizure of bank accounts is an inaccurate representation of the law and its application.

The clarification aims to reassure Lagos residents while reinforcing the government’s commitment to lawful and transparent tax administration.