Nigerians are facing another round of controversy over the country’s tax laws following a notice issued by the Lagos State Internal Revenue Service on how tax obligations may be enforced. The development has triggered widespread concern among taxpayers, economists, and financial experts across the country.
The Lagos Internal Revenue Service disclosed in a recent notice that it is empowered under Section 60 of the Nigeria Tax Administration Act to recover unpaid taxes through direct debit of bank accounts belonging to defaulting taxpayers. The notice, which was seen over the weekend, stated that the tax authority could instruct banks to remit funds to settle established and unpaid tax liabilities.
So far, neither the Nigeria Revenue Service nor the Presidential Fiscal Policy and Tax Reforms Committee has denied the report. This silence has further fuelled public anxiety, especially as the issue directly affects personal and business bank accounts.
Reacting to the development, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, referred to a statement he shared on X, where he explained that the measure was a last resort. According to him, the process, known as the power of substitution, allows tax authorities to issue directives to third parties to remit funds belonging to a taxpayer who has failed to settle a final and established tax liability.
Oyedele stressed that this power is not arbitrary and is only exercised after all legal and administrative processes, including appeals to the courts, have been exhausted. He added that the procedure is guided strictly by due process and is not left to the discretion of tax officials.
However, this clarification appeared to contradict an earlier position attributed to him, where he stated that the new tax laws did not grant any level of government the authority to debit personal bank accounts directly. This apparent inconsistency has raised questions about the true scope of the tax reforms and the protections available to taxpayers.
Meanwhile, economists and financial experts have expressed deep concern over the implications of the policy. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said there was an urgent need to reconcile the conflicting explanations being given to the public.
Yusuf acknowledged that tax reforms are necessary but warned that allowing tax authorities direct access to bank accounts without clear safeguards could create fear and confusion. He noted that apprehension surrounding the policy has already triggered panic in some quarters, with reports of individuals withdrawing money from banks due to fears of arbitrary debits.
According to him, such reactions highlight the importance of clear and transparent communication from authorities driving the reforms. He warned that poor handling of the issue could undermine public confidence in both the tax system and the banking sector.
Yusuf further explained that debiting bank accounts over tax liabilities raises serious questions about ownership of funds. He pointed out that money in an account may not always belong to the account holder, as it could include funds belonging to contractors, suppliers, or third parties.
He cautioned that ignoring this reality could lead to wrongful deductions and legal disputes, thereby damaging trust in the financial system. He also warned that fear of account debits could push people to keep cash at home or convert savings into foreign currencies, weakening financial inclusion efforts.
Yusuf added that from his understanding, such extreme enforcement measures should only be carried out with a clear court order authorising the action. He described judicial oversight as essential when dealing with sensitive matters that affect personal finances.
On his part, a former president of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, described the move as dangerous. He warned that it could create long-term instability in the financial system if not properly checked.
Unegbu questioned the legal foundation of the action, stating that existing laws do not empower government agencies to arbitrarily debit bank accounts without due process. He warned that such practices could erode the credibility of the tax system and damage confidence in the banking sector.
Both experts urged authorities to handle the tax reform process with caution, stressing that enforcement strategies must strike a balance between revenue generation and the protection of public trust.
Bankibusiness learnt that the latest controversy adds to earlier concerns surrounding the new tax laws, including allegations that the gazetted version of the legislation was altered. As debates continue, many Nigerians are calling for clearer explanations and stronger safeguards to prevent abuse and protect financial stability.