The Lagos State Internal Revenue Service (LIRS) has signalled a tougher enforcement posture, announcing plans to recover unpaid taxes from defaulting taxpayers through third parties, including banks, employers, tenants, debtors and business partners.
The directive is contained in a public notice dated January 21, 2026, issued by the revenue agency and made available on its official platform. It underscores the state government’s resolve to widen its tax net and shore up revenue amid mounting fiscal pressures.
Signed by the Executive Chairman of LIRS, Mr Ayodele Subair, the notice cites Section 60 of the Nigeria Tax Administration Act, 2025, which empowers the tax authority to invoke what is known as the “power of substitution” against taxpayers who fail to settle final and established tax liabilities.
Under the provision, LIRS may direct any individual or organisation holding funds on behalf of, or owing money to, a defaulting taxpayer to remit such funds directly to the Service, either in full or partial settlement of the outstanding obligation.
The agency clarified that the measure applies to unpaid Personal Income Tax, Capital Gains Tax, Stamp Duties and Withholding Tax administered by LIRS.
According to the notice, the substitution mechanism is a lawful and efficient tool designed to strengthen tax compliance and curb revenue leakages. It stressed that the power would only be exercised where a taxpayer has failed, neglected or refused to pay an assessed and final liability when due.
“Banks and other financial institutions, employers, tenants, debtors, customers, agents and business partners of a defaulting taxpayer may be directed to pay the amount owed directly to LIRS,” the notice stated.
On procedure, LIRS explained that once a substitution notice is served, the recipient is under a statutory obligation to remit the specified amount from funds belonging to, or payable to, the taxpayer. Failure to comply, it warned, constitutes an offence under the law.
The Service added that banks and financial institutions are required to effect payment without delay, confirm compliance through the LIRS e-Tax platform and, where requested, provide information on the taxpayer’s available balances. Employers, tenants and agents are similarly expected to withhold and remit the stated sums within the timeline specified in the notice.
LIRS further noted that any person who does not hold or owe money to the taxpayer must formally notify the Service in writing within the stipulated period.
While affected parties retain the right to object to an assessment within 30 days of receiving a substitution notice, the agency cautioned that defaulting taxpayers remain liable for any unpaid balance not recovered through the process.
Reinforcing its stance, LIRS warned that non-compliance with substitution directives could attract liabilities equal to the tax amount involved, additional penalties and interest, enforcement actions such as distraint, and possible prosecution.
The development reflects Lagos State’s broader push to entrench fiscal discipline, improve voluntary compliance and ensure that taxes due to the government are promptly recovered in line with existing laws.
