In this edition of WeekendDigits@ITREALMS, REMMY NWEKE analyzes the LIRS’ "Power of Substitution," revealing how the 2025 Tax Act transforms banks and associates into enforcement agents within Nigeria’s tightening digital economy.
1. Preamble: The Digital Taxnet Tightens
For many Nigerians, the phrase "state power" usually evokes images of law enforcement on the streets. However, in the wake of the newly implemented Nigeria Tax Administration Act (NTAA) 2025, the Lagos State Internal Revenue Service (LIRS) is demonstrating that its reach now extends directly into the digital ledgers of financial institutions.
For many Nigerians, the phrase "state power" usually evokes images of law enforcement on the streets. However, in the wake of the newly implemented Nigeria Tax Administration Act (NTAA) 2025, the Lagos State Internal Revenue Service (LIRS) is demonstrating that its reach now extends directly into the digital ledgers of financial institutions.
WeekendDigits@ITREALMS gathered that the recent announcement that the state can "substitute" tax defaulters with third parties, including banks, friends, and business associates, has sent ripples through the socio-economic landscape, marking a new era of aggressive, data-driven revenue collection.
2. The Legal Framework: Understanding Section 60
At the heart of this development is Section 60 of the NTAA 2025. This is not a "random" raid on private wealth, but a codified legal instrument known as the Power of Substitution. It empowers the tax authority to appoint any person who holds money for a tax debtor as an agent of the LIRS.
3. The ‘Substitution’ Logic: From Friends to FinTechs
The most controversial aspect of this reality is the "who." Under the new guidelines, if the LIRS cannot recover funds directly from a defaulter, they can legally serve a notice to:
Commercial Banks: Directing them to remit the tax debt from the defaulter's balance.
Business Partners: Directing them to pay the LIRS instead of paying an outstanding invoice to the defaulter.
Family/Friends: In rare cases where they are legally holding assets or funds in trust for the defaulter, they become the "substituted" party responsible for settlement.
4. Expert View: Financial Privacy in an Era of Transparency
From an ICT and digital transformation perspective, this law signifies the end of "financial invisibility." With the integration of Bank Verification Numbers (BVN) and Tax Identification Numbers (TIN), the LIRS no longer needs to hunt for defaulters; the data does the work.
5. Conclusion: Navigating the new normal
The "Looming Reality" for Lagosians is that tax evasion is no longer a game of hide-and-seek. The Power of Substitution ensures that the debt follows the money, regardless of whose pocket it is currently sitting in.
2. The Legal Framework: Understanding Section 60
At the heart of this development is Section 60 of the NTAA 2025. This is not a "random" raid on private wealth, but a codified legal instrument known as the Power of Substitution. It empowers the tax authority to appoint any person who holds money for a tax debtor as an agent of the LIRS.
Once an "established final tax liability" is confirmed, the law effectively turns anyone, from your landlord to your banker, into an involuntary tax collector for the state.
3. The ‘Substitution’ Logic: From Friends to FinTechs
The most controversial aspect of this reality is the "who." Under the new guidelines, if the LIRS cannot recover funds directly from a defaulter, they can legally serve a notice to:
Commercial Banks: Directing them to remit the tax debt from the defaulter's balance.
Business Partners: Directing them to pay the LIRS instead of paying an outstanding invoice to the defaulter.
Family/Friends: In rare cases where they are legally holding assets or funds in trust for the defaulter, they become the "substituted" party responsible for settlement.
4. Expert View: Financial Privacy in an Era of Transparency
From an ICT and digital transformation perspective, this law signifies the end of "financial invisibility." With the integration of Bank Verification Numbers (BVN) and Tax Identification Numbers (TIN), the LIRS no longer needs to hunt for defaulters; the data does the work.
However, industry analysts warned that this level of access raises significant questions regarding data privacy and the potential for "over-zealous" enforcement that could discourage the use of formal banking channels among the semi-formal sector.
5. Conclusion: Navigating the new normal
The "Looming Reality" for Lagosians is that tax evasion is no longer a game of hide-and-seek. The Power of Substitution ensures that the debt follows the money, regardless of whose pocket it is currently sitting in.
For businesses and individuals, the message is clear: the cost of compliance is now significantly lower than the risk of having your financial relationships, and those of your associates, disrupted by a Substitution Notice.
In 2026, your bank account is no longer a fortress; it is a node in the state's revenue network.
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