The Lagos State Government has announced plans to begin recovering outstanding taxes from defaulting taxpayers by directly accessing their bank accounts and funds held by third parties, including employers, tenants, debtors and business partners.
The move was disclosed in a public notice issued by the Lagos State Internal Revenue Service (LIRS) on the “Power of Substitution pursuant to Section 60 of the Nigeria Tax Administration Act, 2025.” The notice was signed by the Executive Chairman of LIRS, Ayodele Subair, and dated January 21, 2026.
According to LIRS, Section 60 of the Act empowers the tax authority to direct any person or institution holding money on behalf of, or owing money to, a taxpayer who has failed to pay an established final tax liability, to remit such funds to the service in settlement or partial settlement of the debt.
The agency said the substitution power applies to the recovery of unpaid taxes, including Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax administered by LIRS.
LIRS warned that where a taxpayer fails or refuses to settle an outstanding tax liability when due, it may invoke the provision to compel third parties to pay the tax on behalf of the defaulter. Those affected may include banks and other financial institutions, employers, tenants, customers, agents, business partners and any person owing money to the taxpayer.
It stated that once a substitution notice is issued, the recipient is legally required to remit the specified amount from funds belonging to, or payable to, the defaulting taxpayer. The tax liability is deemed settled to the extent of the amount remitted.
The revenue service noted that failure to comply with a substitution directive constitutes an offence under the Act. It added that banks and financial institutions served with such notices must remit the stated amount without delay and confirm compliance through the LIRS e-Tax platform, while also providing information on available balances and any encumbrances when requested.
LIRS warned that it reserves the right to impose maximum penalties or pursue criminal prosecution in cases of deliberate tax evasion, fraud or persistent non-compliance.
On enforcement, the agency said affected taxpayers would be notified of penalties through formal assessment notices, electronic communication or other authorised means. It added that continued default could lead to actions such as garnishment of bank accounts, distraint proceedings, enforcement of liens and prosecution.
The service, however, noted that taxpayers retain the right to seek clarification on penalties, file objections or requests for review within statutory timelines, apply for advance rulings and access dispute resolution mechanisms provided under the law.
LIRS urged residents and businesses in Lagos State to review their tax compliance status, regularise outstanding obligations, file and remit taxes as required, and engage proactively with the service to avoid sanctions.
