The Lagos State Internal Revenue Service (LIRS) has signalled a major crackdown on tax defaulters, announcing that it will leverage a new legal framework to recover unpaid taxes from non-compliant individuals and businesses through third parties, including banks, employers, tenants, and other agents.
In a public notice issued on Saturday, LIRS cited Section 60 of the Nigeria Tax Administration Act (NTAA) 2025, which grants it the “power of substitution” to collect outstanding tax liabilities.
“The NTAA 2025 empowers LIRS 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 for settlement or partial settlement of the outstanding tax,” the notice stated.
According to LIRS, this power applies to all forms of taxes administered by the agency, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT)
Under the law, LIRS may issue a substitution notice directing banks, employers, tenants, agents, or anyone owing money to a defaulting taxpayer to remit the specified amount directly to the agency.
“Once the substitution notice is issued, the recipient is legally obliged to comply,” LIRS warned.
“Failure to do so constitutes an offence under the Act and may attract penalties, interest, and enforcement action.”
The agency also clarified that taxpayers remain liable for any unpaid balances not recovered through the substitution process and urged prompt settlement of tax obligations to avoid additional sanctions.
The notice explicitly requires banks and other financial institutions to immediately remit amounts stated in the substitution notice via the LIRS e-Tax platform (www.etax.lirs.net). Institutions must also report taxpayers’ available balances and any encumbrances upon request.
Employers, tenants, and other affected parties are similarly obliged to withhold the stated amounts from funds due to the taxpayer and remit them within the timeframe stipulated in the notice. Those not holding or owing money to the taxpayer must inform LIRS in writing within the prescribed period.
Recipients of substitution notices may file a written objection to the assessment within 30 days, in line with statutory appeal provisions.
Penalties for Non-Compliance
LIRS warned that failure to comply with the substitution directive could lead to liability equal to the tax amount specified, additional penalties and interest, enforcement measures including distraint, and even prosecution.
Tax experts have described the move as a game-changer in Lagos’ efforts to boost revenue, noting that the legal mechanism could serve as a strong deterrent against tax evasion and reinforce compliance across the state.
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