Fresh Controversy Trails Tax Law as LIRS Cites Power to Debit Bank Accounts

Fresh controversy has emerged over Nigeria’s tax laws following a notice by the Lagos Internal Revenue Service (LIRS) on the implementation of tax recovery provisions.

In a notice obtained by NIGERIA NEWS 247 over the weekend, LIRS stated that it is empowered under Section 60 of the Nigeria Tax Administration Act to recover unpaid taxes through direct debit from bank accounts of defaulting taxpayers.

Neither the Federal Inland Revenue Service nor the Presidential Fiscal Policy and Tax Reforms Committee has formally denied the claim.

Reacting to the development, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, referred NIGERIA NEWS 247 to a clarification he posted on X, describing the measure as a last resort.

According to Oyedele, the “power of substitution” allows a tax authority to direct a third party, such as a bank, to remit funds belonging to a defaulting taxpayer only after a tax liability has been fully established and remains unpaid.

“This power is only exercised after all legal and administrative processes, including appeals to the courts, have been exhausted,” Oyedele said, stressing that the process is neither arbitrary nor discretionary and must follow due process.

However, the clarification appeared to contradict Oyedele’s earlier position that the new tax laws did not empower any tier of government—federal, state, or local—to debit personal bank accounts.

The apparent inconsistency has fueled public concern, prompting reactions from economists and financial experts.

Speaking on the issue, 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 positions to avoid confusion and panic among Nigerians.

Yusuf noted that apprehension over the policy had already triggered reports of individuals withdrawing funds from banks due to fears of arbitrary debits, underscoring the need for clearer communication by authorities driving the reforms.

He warned that direct debiting of bank accounts for tax liabilities raises serious questions about ownership of funds, noting that money held in an account may belong to third parties such as contractors or suppliers.

According to him, failure to adequately address these concerns could undermine public confidence in the tax reform agenda and weaken financial inclusion, as citizens may resort to holding cash or converting savings into foreign currencies.

Yusuf further argued that such enforcement measures should only be carried out with explicit court authorization, emphasizing the importance of judicial oversight in handling sensitive financial matters.

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.

Unegbu questioned the legal basis for the action, stating that existing laws do not permit government agencies to arbitrarily debit bank accounts without due process. He warned that unchecked enforcement could erode trust in both the tax system and the banking sector.

Both experts urged authorities to tread carefully in implementing tax reforms, stressing that revenue generation must be balanced with the protection of public confidence and financial stability.

Recall that Nigeria’s new tax laws have continued to attract controversy, including claims that their gazetted version was altered.