The recent public notice issued by the Lagos State Internal Revenue Service (LIRS) on the Power of Substitution under Section 60 of the Nigeria Tax Administration Act (NTAA) 2025 has reignited a critical conversation around taxation, enforcement, and citizens’ rights in Nigeria’s commercial capital.
At its core, the notice is a reminder that the law empowers LIRS to recover outstanding tax liabilities by directing third parties—such as banks, employers, tenants, and business partners—to remit funds owed to defaulting taxpayers.
The intent of this provision is clear: to curb tax evasion and ensure that government revenues needed for public services are not lost to non-compliance.
There is no disputing the legitimacy of this power. Efficient tax collection is the backbone of governance, especially in a state like Lagos with enormous infrastructure, security, and social welfare obligations.
When taxes go unpaid, the burden unfairly shifts to compliant citizens, while public projects suffer delays or outright abandonment.
However, the exercise of such sweeping authority must be handled with caution, clarity, and fairness.
For many taxpayers, particularly small and medium-sized businesses already grappling with rising costs, inflation, and tight credit conditions, the fear is not taxation itself but the manner of enforcement.
The power to freeze accounts or divert funds through third parties—if poorly communicated or hastily applied—can cripple legitimate businesses, disrupt payroll, and erode trust in public institutions.
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This is why transparency is non-negotiable. LIRS must ensure that substitution notices are issued only after tax liabilities are clearly established, disputes resolved, and taxpayers duly notified.
Due process must not become collateral damage in the quest for revenue.
Equally important is public education. Many taxpayers are still unfamiliar with the provisions of the NTAA 2025, the distinction between assessed and final liabilities, and the avenues available for objection or settlement.
Without sustained enlightenment, enforcement actions risk being perceived as punitive rather than corrective.
The notice also places a heavy responsibility on banks and financial institutions, which are now legally obligated to comply swiftly with substitution directives.
While this aligns with global best practices in tax administration, it underscores the need for strong safeguards to prevent errors, abuse, or conflicting claims that could expose third parties to legal and reputational risks.
Ultimately, taxation thrives not on coercion alone but on confidence. When citizens believe the system is fair, predictable, and accountable, compliance follows naturally.
As Lagos continues to position itself as Africa’s leading sub-national economy, LIRS must balance firmness with fairness—using the Power of Substitution as a last resort, not a first impulse.
Revenue enforcement should go hand in hand with dialogue, dispute resolution, and a genuine commitment to building a tax culture anchored on trust.
The law may empower the state, but wisdom must guide its use.
