Expert Raises Red Flag As Govt Moves To Debit Individual Bank Accounts Over Unpaid Taxes

Tax and financial experts have raised concerns over the Lagos Internal Revenue Service’s (LIRS) move to recover unpaid taxes through direct debit of bank accounts, warning that the policy could fuel panic, weaken confidence in the banking system and undermine Nigeria’s tax reform agenda.

Naijaonpoint reports that the concerns followed a notice by the LIRS, which cited Section 60 of the Nigeria Tax Administration Act as empowering the agency to recover outstanding tax liabilities through direct bank debits.

While the Nigeria Revenue Service and the Presidential Fiscal Policy and Tax Reforms Committee have not formally debunked the notice, the chairman of the committee, Taiwo Oyedele, clarified in a statement on 𝕏 that such powers were not arbitrary.

Oyedele explained that the measure, known as the power of substitution, was a recovery mechanism applicable only after all legal processes had been exhausted.

“The power of substitution is a tax recovery mechanism that permits the tax authority to issue a directive to a third party (a ‘substitute’) to remit funds belonging to a defaulting taxpayer to settle a final, established, and unpaid tax liability,” he said.

“This power is only exercised after all legal and administrative processes, including appeals to the courts, have been exhausted.”

He added that the process was strictly governed by due process and not discretionary.

However, observers noted that the clarification appeared to fall short of Oyedele’s earlier assurance that the new tax laws did not empower any tier of government to debit personal bank accounts.

Experts Demand Clarity, Caution

Reacting to the development, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the conflicting positions required urgent reconciliation to avoid widespread misunderstanding and fear.

According to Yusuf, although tax reforms were necessary, allowing tax authorities to access bank accounts directly without adequate clarity could be counterproductive.

“I think it’s important that we reconcile those two positions. Because one of the apprehensions people had was that tax authorities can access and begin to tamper with people’s accounts,” he told Daily Post in an interview.

Yusuf revealed that the uncertainty had already sparked panic reactions among Nigerians, with reports of people withdrawing money from banks for fear of arbitrary debits.

“You know that fear was expressed by a lot of people. It was so bad that some people were even taking their money away from the bank,” he said.

He warned that such reactions highlighted the danger of poor communication in the implementation of sensitive reforms.

‘Funds In Accounts May Not Belong To Account Holders’

The economist further argued that debiting bank accounts raised fundamental questions about ownership of funds in such accounts.

“What is the guarantee that the amount in the person’s account is the person’s money? It could be other people’s money. It could be a contractor. It could be a supplier,” Yusuf said.

“Somebody puts money in your account, and the tax authority now says because you are owing tax, you have an asset. It may not be your asset.”

Yusuf warned that unresolved concerns could weaken public trust in the tax reform agenda and derail efforts to deepen financial inclusion.

According to him, fear of bank debits could push Nigerians to keep cash at home or convert their savings to foreign currencies, undermining confidence in the financial system.

“It’s not helping the whole idea of promoting tax reform. Otherwise, you scare people away,” he added.

He stressed that such enforcement measures should only occur with clear court orders, describing judicial oversight as essential.

“I heard that this kind of action cannot take place unless there is a clear court order. That is when some of these extreme actions can be taken,” he said.

On his part, 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 government agencies were not empowered to arbitrarily debit bank accounts without due process.

“If unchecked, such practices could damage the credibility of both the tax system and the financial sector,” he warned.

“We are creating a monster here. I think they are doing the wrong thing, and that’s why I think the law has to stop them.”

Both experts urged authorities to handle the tax reform process with caution, stressing that while revenue generation was important, enforcement strategies must be balanced against public confidence, legal safeguards and financial stability.

Naijaonpoint reports that the latest controversy adds to earlier disputes surrounding the new tax laws, including claims that the gazetted version of the legislation was altered.