Fresh controversy has emerged over Nigeria’s tax reforms following a notice by the Lagos State Internal Revenue Service (LIRS) suggesting it can recover unpaid taxes through direct bank account debits.
In a notice seen by Newsmen at the weekend, LIRS cited Section 60 of the Nigeria Tax Administration Act, stating that the law empowers tax authorities to recover outstanding tax liabilities through a mechanism known as substitution, which allows direct debit from a taxpayer’s bank account.
Neither the Federal Inland Revenue Service nor the Presidential Fiscal Policy and Tax Reforms Committee has denied the report.
Responding to the development, the chairman of the committee, Taiwo Oyedele, referred to an earlier post on his X account, where he described the measure as a last-resort enforcement tool.
According to Oyedele, the power of substitution allows tax authorities to direct a third party to remit funds belonging to a defaulting taxpayer only after a tax liability has been conclusively established and all legal processes, including court appeals, have been exhausted. He stressed that the process is governed strictly by due process and is neither arbitrary nor discretionary.
However, the clarification appears to contradict Oyedele’s earlier position that the new tax laws do not empower any level of government to debit personal bank accounts.
The development has drawn sharp reactions from economists and financial experts, who warned of possible public panic and damage to confidence in the banking system.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, said the conflicting explanations must be reconciled to avoid fear and confusion among Nigerians. He noted that apprehension over possible account debits had already led to reports of people withdrawing money from banks.
Yusuf warned that direct debiting of accounts raises serious concerns, as funds in an individual’s account may belong to third parties such as contractors or suppliers. He cautioned that unresolved fears could undermine the tax reform agenda, weaken financial inclusion, and encourage cash hoarding or currency conversion.
He added that such enforcement measures should only be carried out with clear court authorization, stressing that judicial oversight is essential in sensitive matters involving personal finances.
Similarly, a former president of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, described the move as dangerous, warning that it could create long-term instability in the financial system. He questioned the legal basis for arbitrary account debits and cautioned that such actions could erode trust in both the tax system and the banking sector.
Both experts urged authorities to handle tax reforms carefully, stressing that enforcement must balance revenue generation with the protection of public confidence and financial stability.
Hence, they recall that the new tax laws have been surrounded by controversy, including allegations that the gazetted version was altered.
