Unpaid Taxes: How power of substitution works, by LIRS Chairman

The Executive Chairman of the Lagos State Internal Revenue Service (LIRS) Dr Ayodele Subair, has denied plans that the agency intends to directly seize funds from the bank accounts of defaulting organisations through third parties including financial institutions. Daily Trust reports that the LIRS had  announced that it will enforce its statutory powers to recover […]

The Executive Chairman of the Lagos State Internal Revenue Service (LIRS) Dr Ayodele Subair, has denied plans that the agency intends to directly seize funds from the bank accounts of defaulting organisations through third parties including financial institutions.

Daily Trust reports that the LIRS had  announced that it will enforce its statutory powers to recover unpaid taxes from defaulting taxpayers through third parties, including banks, employers, debtors, tenants, and business partners.

This was contained in a public notice dated January 21, 2026.

According to the notice, signed by Subair, the state revenue service is empowered by Section 60 of the Nigeria Tax Administration Act, 2025, to direct any person holding money on behalf of, or owing money to, a taxpayer who has failed to settle a final tax liability to remit such funds.

The agency said the power of substitution applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties, and Withholding Tax administered by LIRS.

The notice read, “The Lagos State Internal Revenue Service (LIRS) issues this public notice to inform the general public, particularly employers, financial institutions, business operators, and tax agents, of the provisions of Section 60 of the Nigeria Tax Administration Act, 2025 (NTAA 2025), relating to the power of substitution vested in the relevant tax authority.

“The NTAA 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 final tax liability when due, to remit such money to the Service in settlement, or partial settlement, of the outstanding tax.

“The power of substitution is a lawful collection mechanism designed to ensure efficient recovery of unpaid taxes, including Personal Income Tax (PIT), Capital Gains Tax (CGT), Stamp Duties, and Withholding Tax (WHT) administered by LIRS.”

However, the notice triggered reactions on social media with many alleging that the development will amount to seizing Lagos residents’ funds directly from banks.

JP Attueyi (@jpattueyi) on his X handle argued that “This isn’t about compliance anymore. It’s about control.”

While interpreting the notice, he said, “If LIRS says you owe tax and they’ve “established” it, they can: “instruct your bank to pay them from your account…”

• instruct your employer to divert your salary
• instruct your tenants or customers to pay them instead of you.
• instruct anyone who owes you money to settle your tax first

“No court appearance. No negotiation. Just a notice.

Speaking during an interview on Tuesday night, the LIRS boss said the narrative that the agency wants to seize funds isn’t “a good representation of the action.”

Subair, however, insisted the power of substitution remains a legal instrument used to recover unpaid taxes.

He explained that the process may take up to five years after an assessment.

He said, “It’s a bit funny when we use the word seize. So the whole idea is that the power of substitution is really a legal instrument that is used to recover unpaid taxes. These unpaid taxes really are a result of an assessment that has come out over the time.

“The assessment comes out, people have objected to them, we go back and forth, we have a lot of dispute mechanisms in place, we invite all the taxpayers, we have reconciliation exercises up and down. Then it gets to a point that there’s no more traction. At that point, we issue what we call a Notice of Refusal to Amend.

“After this, we issue a Demand Notice. When we issue the Demand Notice, again, people still want to, even though they’re not entitled to any further engagement directly with us, some still want to talk to you. And then the Tax Appeal Tribunal Procedure starts.

“At the end of that, it goes to the High Courts. After the High Courts, it goes to the Court of Appeal, and at times it gets to the Supreme Court. So, we can see that there’s a long time frame from when the assessments are issued and when we finally dispose of all the cases through the court system.

“So at that point in time, it becomes that the taxpayer is probably just a defaulter or he has become entirely recalcitrant and has no intention of paying. That is when we can think of applying the power of substitution. So, looking at a time frame, it’s not less than five years.

So if anybody says that the Tax Authority wants to seize, then that might not be a good representation of the action. Or of doubted intentions.”

He expressed concern that many Nigerians have not taken time to read the tax laws rather they rely on “hearsays and narratives by mysterious people.”