Lagos govt introduces new tax law allowing to recover unpaid taxes from Bank accounts

The Lagos State Internal Revenue Service (LIRS) has announced a new tax law that allows state revenue authorities to recover unpaid taxes directly from various bank accounts. This law enables the confiscation of funds not only from tax defaulters, but also from the accounts of employers, tenants, business associates, and others financially connected to the defaulters.

In a statement aimed at Lagos residents and business owners, LIRS clarified that the Nigeria Tax Administration Act (NTAA) 2025 gives them the authority to deduct outstanding tax payments from rent and from accounts held by individuals or entities holding funds for a defaulting taxpayer.

The law broadens the scope of tax collection efforts beyond a defaulter’s personal bank account to include direct recovery from the accounts of family members, friends, and business partners who owe or possess money for the taxpayer.

LIRS pointed out that Section 60 of the NTAA 2025 empowers the state to issue substitution notices to banks, employers, tenants, debtors, customers, and any other person or organization that holds or owes money to a tax defaulter. These notices require those identified to submit the specified amounts to the LIRS to settle the tax debts.

“If a taxpayer fails to address any established tax liabilities by the due date, LIRS may use its authority under Section 60 to instruct banks, employers, tenants, and other relevant parties to pay the owed amounts,” the service explained.

LIRS also mentioned that substitution notices would be sent to both the tax defaulter’s banks and the financial institutions where connected third parties hold accounts. These institutions must legally disclose the necessary account balances and transfer the unpaid tax amounts to LIRS promptly.

This initiative is part of ongoing efforts by the Lagos State Government, under Governor Babajide Sanwo-Olu, to enhance tax compliance and increase the state’s internally generated revenue.