Confusion, panic trail plan to debit bank accounts for tax debts

Many Nigerians are worried following a notice by the Lagos Internal Revenue Service (LIRS) saying it has the legal power to recover unpaid taxes directly from people’s bank accounts.

According to LIRS, this power is contained in Section 60 of the Nigeria Tax Administration Act, which allows tax authorities to debit accounts of people who owe confirmed and unpaid taxes.

So far, neither the Federal Inland Revenue Service nor the Presidential Fiscal Policy and Tax Reforms Committee has denied the report.

However, the chairman of the committee, Taiwo Oyedele, explained in a post on X (formerly Twitter) that this action is only a last resort.

He said the process, known as “power of substitution,” allows tax authorities to order a third party, such as a bank, to release funds belonging to a taxpayer who has refused to pay an established tax debt.

According to him, this step can only happen after all legal steps have been followed, including appeals and court processes. He stressed that the power is not used arbitrarily and must follow due process.

This explanation, however, appears to contradict his earlier statement where he said the new tax laws do not give any level of government the power to debit personal bank accounts.

Experts Raise Concerns

Economists and financial experts have raised serious concerns about the issue.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, said there is a need to clearly explain and reconcile the conflicting statements to avoid fear among Nigerians.

He noted that reports of possible account debits have already caused panic, with some people withdrawing money from banks out of fear.

According to Yusuf, direct access to bank accounts raises serious questions because money in an account may not belong entirely to the account holder. It could include funds meant for contractors, suppliers, or other third parties.

He warned that if these issues are not properly addressed, public trust in the tax reform process could be damaged.

Yusuf also said fear of account debits could push people to keep cash at home or convert their savings to foreign currencies, which could harm financial inclusion and weaken confidence in the banking system.

He added that such actions should only be allowed with a clear court order, stressing that judicial oversight is very important in matters like this.

Banking Expert Calls It Dangerous

On his part, former President of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, described the move as dangerous.

He warned that allowing government agencies to debit bank accounts without strict legal backing could cause long-term problems for the financial system.

Unegbu questioned whether existing laws truly allow such actions and warned that if not properly checked, it could damage both the tax system and the banking sector.

Both experts advised the government to handle tax reforms carefully, saying revenue generation must not come at the cost of public trust and financial stability.

It would be recalled that the new tax laws have continued to generate controversy, including allegations that the final gazetted version was alt