Tax defaulters’ bank accounts can be debited to recoup unpaid taxes
A new controversy has emerged in President Bola Tinubu’s tax laws as tax czar Taiwo Oyedele says defaulters’ personal bank accounts can be debited to recoup unpaid taxes, a development which has understandably sparked debate among economic experts.
Recall that in spite of the fact that the House of Representatives had said that aspects of the tax bills sent to the president for assent had been unlawfully tampered with, the Tinubu administration brushed that aside and is bent on enforcing the controversial laws.
Here is the report on targeting personal bank accounts to recoup unpaid taxes from defaulters:
Tax authorities can debit defaulting tax payers’ accounts, Says Taiwo Oyedele
•As experts urge caution
A new wave of controversy is brewing over Nigeria’s tax ecosystem on the heels of a notice from the Lagos Internal Revenue Service (LIRS) regarding the enforcement of the President Bola Tinubu tax laws in some cases, through direct bank debits from tax defaulters.
In the notice issued over the weekend, the LIRS said that it has the power under Section 60 of the Personal Income Tax Act (as amended) to appoint a bank as a collector to recoup unpaid taxes via direct debit from private bank accounts of tax defaulters.
While the Nigeria Revenue Service (NRS) and the Presidential Fiscal Policy and Tax Reforms Committee have not officially commented on the report, Committee Chairman TaiwoOyedele spoke on the matter via his X account, describing the action as a “last resort.”
His words: “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 emphasised that this power could only be put into effect after all legal and administrative processes, including court appeals, would have been exhausted.
However, critics point out that this clarification appears to conflict with Oyedele’s earlier stance, where he suggested that the new tax laws, which have been mired in controversy, would not empower any tier of government to arbitrarily debit personal accounts.
Economists and financial experts have expressed deep concern about the development, warning that the policy could trigger panic among the people. andtherewith the economy.
One of such experts, the CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, noted that apprehension was already driving some individuals to withdraw their savings from banks.
”This requires much more clarification from those championing tax reforms,” Yusuf told DailyPost.
“If you debit an account, what is the guarantee that the money belongs to the account holder? It could belong to a contractor or a supplier. Debiting such funds arbitrarily ignores the reality of third-party transactions.”
Yusuf further said, “You scare people away. They may begin to keep cash at home or convert savings into foreign currency. This process must be managed carefully; such extreme actions should only occur with a clear court order.”
Echoing similar sentiments, former President of the Chartered Institute of Bankers of Nigeria (CIBN), MaziOkechukwuUnegbu, warned against the move describing it as “dangerous” for the long-term stability of the financial system.
He questioned the legal basis for arbitrary debits submitting that such policy could damage the credibility of both the tax system and the banking sector.
Said he, “We are creating a monster here. I believe they are doing the wrong thing, and the law must be used to stop them.”
This current controversy comes amid ongoing debates over the transparency of Nigeria’s new tax laws, including allegations that the gazetted versions of recent reforms were tampered with by elements in the Executive arm of government.
WatchmanPost takes the issue further:
Can tax authorities indeed debit your bank account directly? While Tax Czar Taiwo Oyedele says it is a “last resort” under due process, experts warn of a “financial monster” that could scare Nigerians away from banks.
Tax Reform vs. Taxpayer Rights:
The LIRS recently sisignalled tax authorities’ right to recoup unpaid taxes via direct bank debits. While the Presidential Committee insists this power is lawful, economists warn of potential trouble for financial inclusion and confidence in the banking system.
Legal arguments and expert warnings.
Frequently asked questions (FAQ)
1. Can the LIRS or FIRS really debit my account without my permission?
Under Section 60 of the tax laws, authorities have the “power of substitution,” allowing them to appoint a bank to remit funds from a defaulter’s account. However, officials clarify this is only for “final and established” liabilities.
2. Does this happen automatically if I owe tax?
No. According to Taiwo Oyedele, this is a last resort. It should only happen after all administrative processes, audits, and court appeals have been fully exhausted.
3. Why are experts worried about this policy?
Experts like Dr. Muda Yusuf argue that funds in a bank account don’t always belong to the account holder (e.g., contractors or third-party funds). There is also a major concern that fear of “arbitrary debits” will lead Nigerians to withdraw their money and keep cash at home.
4. Is a court order required before my account is debited?
While the tax authorities cite statutory powers, many financial experts and lawyers maintain that such extreme enforcement must be backed by a specific judicial order to ensure transparency and protect the taxpayer’s rights.
5. What should I do if I have an outstanding tax liability?
It is advised to engage with the relevant tax authority early to reconcile figures or appeal an assessment before it becomes a “final and established” debt that could trigger recovery actions.
