Lagos Government to Enforce Tax Recovery Through Banks, Employers, Business Partners
The Lagos State Internal Revenue Service (LIRS) has announced plans to intensify the recovery of outstanding tax liabilities by invoking its statutory powers to collect unpaid taxes directly through third parties, including banks, employers, tenants, debtors, customers, agents, and business partners of defaulting taxpayers.
This directive was contained in a public notice dated January 21, 2026, and published on the official LIRS website. The notice, signed by the Executive Chairman of the Service, Mr Ayodele Subair, cited Section 60 of the Nigeria Tax Administration Act (NTAA), 2025, which empowers tax authorities to recover unpaid taxes through a process known as substitution.
Under the provision, LIRS may instruct any individual or organisation holding funds on behalf of, or owing money to, a taxpayer who has failed to settle a final and established tax liability, to remit such funds directly to the Service. This mechanism applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties, and Withholding Tax administered by LIRS.
According to the notice, the power of substitution is a lawful and effective tax collection tool designed to enhance compliance and ensure prompt recovery of government revenue. It explained that where a taxpayer neglects or refuses to pay an outstanding tax obligation when due, LIRS is authorised to issue substitution notices to banks, employers, tenants, customers, agents, and business partners who transact with the defaulting party.
The agency stressed that once a substitution notice is served, the recipient is legally required to remit the specified amount from funds belonging to the taxpayer to LIRS within the stated timeframe. Failure to comply constitutes an offence under the law and may attract penalties, interest charges, enforcement actions such as distraint, and possible prosecution.
Banks and financial institutions are required to remit affected sums without delay, confirm compliance through the LIRS e-Tax platform, and provide information on the taxpayer’s available balances when requested. Employers, tenants, agents, and other affected parties are also directed to deduct the specified sums from payments due to the taxpayer and remit them promptly.
LIRS further stated that parties who do not hold or owe money to a taxpayer named in a substitution notice must notify the Service in writing within the stipulated period. Additionally, affected persons reserve the right to file objections or appeals within 30 days, in line with the provisions of the law.
While enforcement actions may involve third parties, LIRS warned that defaulting taxpayers remain fully liable for any unpaid balance not recovered and urged them to settle outstanding tax assessments promptly to avoid penalties and legal consequences.
The Service reaffirmed its commitment to strengthening tax compliance and ensuring efficient revenue collection in Lagos State.
Lagos Government to Enforce Tax Recovery Through Banks, Employers, Business Partners
Byadmin
Jan 25, 2026