The Lagos State Internal Revenue Service (LIRS) has directed banks, employers and other third parties to remit outstanding taxes owed by defaulting individuals and businesses, invoking provisions of the Nigeria Tax Administration Act 2025.
In a notice issued on Monday, the tax authority said it had begun serving substitution notices on institutions holding funds or making payments to identified tax defaulters.
The notices compel such third parties to deduct and remit unpaid taxes directly to the state government.
According to LIRS, the enforcement action targets outstanding Personal Income Tax and Withholding Tax liabilities where assessments have been concluded and final demand notices ignored.
The agency explained that the move is aimed at improving tax compliance and strengthening internally generated revenue, stressing that the law empowers it to recover unpaid taxes from any source holding funds belonging to a defaulter.
Under the substitution arrangement, banks may be required to deduct tax liabilities from customers’ accounts, while employers and tenants may be instructed to redirect salaries or rent payments to settle outstanding tax obligations.
LIRS noted that failure by third parties to comply with the notices could attract legal consequences, as the law places an obligation on them to cooperate once formally notified.
The development has generated mixed reactions. Some stakeholders have criticised the approach as excessive, while others argue it reflects standard enforcement practices used in many efficient tax systems globally.
Tax analysts say the decision represents a significant escalation in enforcement and could prompt individuals and businesses across Lagos to reassess their tax compliance status.
LIRS maintained that the measure is lawful and necessary, adding that it sets a precedent that may be adopted by other states seeking to improve tax collection under the new national tax framework.
