Lagos Revenue Service Activates Power of Substitution to Boost Tax Recovery

• New tax law permits authorities to collect money from third party who owe, hold funds for tax defaulters 

•Puts obligation on banks and other financial institutions, employers, tenants, debtors, or customers of the taxpayer, agents, any person owing money to taxpayer, others 

•NTPIC begins stakeholder engagements, meets Adedeji, others

James Emejo in Abuja

Lagos State Internal Revenue Service (LIRS) said it had activated 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 to boost tax enforcement and recovery from defaulting taxpayers, going forward.

In a public notice, LIRS stated that NTAA 2025 empowered it 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”.

That was as Chairman, National Tax Policy Implementation Committee (NTPIC), Mr. Joseph Tegbe, said the body had commenced structured stakeholder engagements to ensure a humane, inclusive, and well-coordinated implementation of the new tax acts amid significant fiscal reforms.

Working closely with Nigeria Revenue Service (NRS) and Presidential Fiscal Policy Reform Committee (PFPRC), the committee aims to bridge the gap between policy intent and execution by promoting clarity, managing expectations, and ensuring that implementation reflects the realities of businesses, citizens, and all levels of government.

Also, Chairman, Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, said there had been feedback from workers who had received their salaries for January 2026, confirming a reduction in their Pay As You Earn (PAYE) tax, resulting in higher take home pay under the new tax laws.

He added that to ensure that relevant individuals charged with the responsibility of implementing the changes for the benefit of employees in their organisations were well informed, the committee will host a session for key stakeholders in collaboration with the Joint Revenue Board (JRB) on Wednesday.

Power of Substitution is a legal collection tool that allows tax services to bypass a non-compliant taxpayer and collect outstanding taxes directly from anyone who holds money for them or owes them money as granted under relevant sections of the NTAA.

Lagos Revenue Service further stressed that the tool sought 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.

It stated, “Where a taxpayer fails, neglects or refuses to settle any established outstanding tax liability when due, LIRS may exercise its power under Section 60 to direct any of the following persons to pay the amount owed by the taxpayer – banks and other financial institutions, employers, tenants, debtors, or customers of the taxpayer; agents, business partners, and any person holding money on behalf of the taxpayer; any person owing money to the taxpayer, whether presently due or accruing.

“Once a substitution notice is issued, the person served is statutorily required to remit to LIRS the amount specified in the notice from funds belonging to, or payable to, the defaulting taxpayer.

“The tax liability is deemed paid to the extent of the remittance made pursuant to the substitution. Failure to comply with such a directive constitutes an offence under the Act.”

On compliance requirements, and obligation of banks and financial institutions under the law, the notice clarified, “Upon receipt of a substitution notice, all banks and financial institutions are required to remit the stated amount to LIRS without delay, and provide confirmation of compliance to the service.”

Banks were also required to report the taxpayer’s available balances and any encumbrances as may be requested by LIRS.

Meanwhile, as part of its initial consultations, the committee’s leadership team met with Presidential Fiscal Policy Reform Committee (FPRC), led by Mr. Taiwo Oyedele, to ensure alignment between reform objectives and practical implementation realities.

Oyedele highlighted challenges arising from misinformation about certain provisions of the law, stating that some provisions have been misinterpreted in public discussions.

He added that targeted and accessible communication initiatives were being developed to address the gaps, with stakeholder feedback playing a key role in shaping the reform process.

Also, in a separate engagement with Executive Chairman of Nigeria Revenue Service (NRS), Dr. Zacch Adedeji, NTPIC focused on harmonising implementation priorities and strengthening institutional coordination. The committee outlined its ongoing activities and implementation roadmap.

On his part, Adedeji commended NTPIC’s proactive approach, describing the new tax laws as a significant development in Nigeria’s fiscal framework.

The NRS boss further stated that while new policies might take time to gain full public acceptance, a transparent, well-sequenced, and education-driven implementation process will gradually build confidence and trust.

The committee stressed that effective tax reform depended not only on legal and technical design but also on effective communication and stakeholder engagement.

Tegbe pointed out that structured stakeholder engagement and consistent communication were central to the success of the reforms.

He assured that consultations will continue with National Economic Council, Nigeria Governors’ Forum, local government leaders, as well as traditional, religious, and community leaders.

He also stressed that the new tax Acts were designed to create a simpler, fairer, and more predictable tax system that fostered voluntary compliance, strengthened investor confidence, and supported sustainable economic growth.

The NTPIC team included Chairman of Stakeholders Engagement Subcommittee, Ismael Ahmed, and Chairman of Technical Subcommittee, Mr. Ajibola Olomola.