LAGOS: The Lagos State Government has announced plans to intensify enforcement against tax defaulters by recovering outstanding tax liabilities through third parties, including banks, employers, tenants, debtors and business partners.
In a public notice issued on Monday, the Lagos State Internal Revenue Service (LIRS) said it would invoke its statutory Power of Substitution to compel the recovery of confirmed tax debts from individuals and organizations connected to defaulting taxpayers.
LIRS explained that the move is backed by Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025), which authorizes tax authorities to intercept funds belonging to, or owed to, taxpayers who fail to settle final and established tax assessments when due.
According to the agency, the Power of Substitution allows it to direct any person holding money on behalf of a taxpayer, or owing money to that taxpayer, to remit such funds directly to the service in settlement or part settlement of outstanding tax liabilities.
“The Nigeria Tax Administration Act 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 tax liability, to remit such funds to the Service,” the notice stated.
The enforcement mechanism applies to taxes administered by LIRS, including Personal Income Tax, Capital Gains Tax, Withholding Tax and Stamp Duties.
LIRS clarified that substitution notices may be served on a wide range of third parties, including banks and financial institutions, employers, customers, agents, tenants, business partners and other persons holding funds belonging to defaulting taxpayers.
The agency added that recovery may also be made from debts that are due or accruing to the taxpayer.
Once a substitution notice is issued, the recipient is legally required to remit the specified amount from funds belonging to or payable to the taxpayer. LIRS warned that failure to comply with such directives constitutes an offence under the law.
Under the directive, banks and financial institutions are required to comply immediately with substitution notices and confirm remittances through the LIRS e-Tax platform.
They may also be directed to disclose available balances and any encumbrances on affected accounts.
Employers, tenants, agents and other affected parties are similarly required to deduct the specified sums from payments due to the taxpayer and remit them within the timeframe stated in the notice.
LIRS noted that recipients who do not hold or owe funds to the taxpayer must notify the agency in writing within the stipulated period.
While affected parties retain the right to object to underlying tax assessments within 30 days, the agency stressed that substitution enforcement does not extinguish the taxpayer’s full liability, adding that any outstanding balance remains payable by the defaulter.
The service warned that non-compliance could attract penalties, interest, further enforcement actions including distraint, and possible prosecution.
LIRS urged taxpayers with outstanding tax liabilities to regularise their positions promptly to avoid escalating enforcement measures.
