Nigerians are panicking after the Lagos Internal Revenue Service (LIRS) announced it can recover unpaid taxes by directing banks and other third parties to release funds. The move has sparked fear and confusion over the new tax laws.
The notice cites Section 60 of the Nigeria Tax Administration Act (NTAA 2025), which empowers LIRS to collect unpaid taxes through a mechanism called the “Power of Substitution.”
Under this law, LIRS can issue a directive to a third party — such as a bank, employer, or business partner — to remit funds belonging to a taxpayer who has an outstanding, legally established tax liability. Authorities say this power is only exercised after all legal and administrative procedures, including court appeals, are exhausted.
However, the announcement contrasts with earlier assurances that personal bank accounts could not be directly debited under the new tax laws, leaving many Nigerians concerned.
Experts have warned of serious consequences. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, noted that public confusion could lead to panic withdrawals, reduced trust in the banking system, and broader financial instability.
“Debiting bank accounts over tax liabilities raises questions about ownership. Funds in a person’s account may belong to contractors, suppliers, or third parties. If authorities act without proper oversight, it could undermine public confidence and financial inclusion,” Dr. Yusuf said.
He added that such enforcement should only occur with clear court authorization to prevent abuse.
Similarly, Mazi Okechukwu, former president of the Chartered Institute of Bankers of Nigeria, described the move as dangerous, warning it could create long-term instability and damage public trust in the financial system.
Experts are urging authorities to communicate clearly and implement safeguards, saying failure to do so could trigger panic, encourage people to hoard cash, convert savings to foreign currency, or withdraw funds from banks.
The controversy highlights ongoing challenges in implementing Nigeria’s tax reform, with critics emphasizing the need for transparency and proper communication to maintain confidence in the financial system.
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