Nigerians Alarmed as Authorities Plan Bank Account Debits for Tax Arrears

The Lagos Internal Revenue Service’s notice on the execution of the tax law has sparked yet another dispute among Nigerians regarding the nation’s tax regulations.

In a notice released over the weekend, LIRS revealed that it has the authority granted to it by Section 60 of the Nigeria Tax Act Administration to recover outstanding taxes by direct bank debit.

The report has not been refuted by the Nigeria Revenue Service or the Presidential Fiscal Policy and Tax Reforms Committee.

Taiwo Oyedele, the committee’s chairman, cited his X statement, which stated that the action is the tax authority’s last option.

In order to settle a final, established, and unpaid tax liability, the tax authority may use the power of substitution, a tax recovery method, to direct a third party (a “substitute”) to provide money that belongs to a defaulting taxpayer.

In response to a commonly asked issue about X, he stated, “This power is only exercised after all legal and administrative processes, including appeals to the courts, have been exhausted.”

He went on to clarify that the power of arbitrary substitution is neither discretionary nor arbitrary, emphasizing that due process tightly governs its exercise.

His previous stance, according to which the new tax rules did not provide anyone the authority to debit personal accounts—federal, state, or local government councils—is not supported by the most recent clarification.

In the meantime, financial professionals and economists expressed their opinions about the development.

Speaking, Dr. Muda Yusuf, the CEO of the Center for the Promotion of Private Enterprise, stated that the opposing viewpoints must be reconciled.

In response, Yusuf stated that although tax reforms were essential, the problem of tax authorities having direct access to bank accounts needed to be explained more clearly in order to prevent frightening and confusing Nigerians.

He pointed out that concerns over the program have already caused panic in some areas, with tales of people taking money out of banks out of concern about random debits.

He said that these responses highlighted the need for authorities supporting the reforms to communicate more effectively.

Yusuf cautioned that debiting bank accounts for tax obligations raises important concerns regarding who owns the money in those accounts.

He clarified that money in a person’s account could not always be theirs because it might come from suppliers, contractors, or other parties.

He emphasized that these issues could harm financial inclusion and erode public trust in the tax reform effort if they are not adequately addressed.

He claims that consumers may store cash at home or move their savings into foreign currencies out of fear of account debits, which would erode public confidence in the banking system.

According to Dr. Yusuf, judicial monitoring is crucial in handling such delicate circumstances, and such severe enforcement actions should only take place with a clear court order allowing the conduct.

“I believe it’s important that we reconcile those two positions,” he stated. Because I am aware of people’s concerns, one of those concerns was that tax authorities might gain access to people’s accounts and start tampering with them.

You are aware that many people expressed their fear. Some people were even withdrawing their money from the bank because it was so awful.

However, I’m not sure if he addressed the issue that the tax authorities can go ahead and debit people’s accounts if there is a liability. Naturally, that needs much more explanation, particularly from proponents of tax reform.

“Because people are concerned about tax reform because of these types of things. Because there is no assurance that the money in someone’s account is indeed theirs if you claim to wish to debit their accounts.

You realize? The money might belong to someone else. Perhaps it’s a contractor. It might be a vendor.

“After someone deposits money into your account, a tax authority declares that you have an asset because you owe money.”

It’s not a benefit to you. It might not be a benefit. That is what I am trying to say.

These are a few of the difficulties. Because these are part of the problem when people start to embrace fiat and worry about it.

It’s detrimental to the overall goal of advancing tax reform. I mean, you shouldn’t be amplifying this kind of thing. It is detrimental to the federal government’s efforts to promote reform.

If not, you frighten away folks. People could start withdrawing their money now.

“People may start converting their money into different currencies right now and storing it at home. You know, it might result from all these problems with financial inclusion.

It might lead to an issue with financial inclusion. For this reason, some of us believe that we must handle this process with extreme caution. because these are extremely delicate matters.

And I believe I once heard that a clear court order granting that kind of consent is required for this kind of conduct to occur. I overheard them say that. that the court must give its approval.

“We must appear in court, and the judge will decide that this is it. In an interview with DAILY POST on Monday, he said, “And that is when some of these extreme actions can be taken.”

Mazi Okechukwu, the former president of the Chartered Institute of Bankers of Nigeria, called the action risky and cautioned that it would cause long-term instability in the financial system.

Additionally, Unegbu questioned the action’s legal foundation, claiming that government authorities lack the authority to randomly debit bank accounts without following the proper legal procedures.

He cautioned that such actions could undermine the legitimacy of the financial industry and the tax system if left unchecked.

Both experts emphasized that enforcement tactics must strike a balance between revenue generation and the need to safeguard public trust and financial stability, and they advised authorities to handle the tax reform process cautiously.

Here, we’re building a monster.

“I believe they are acting improperly. He said, “I believe the law has to stop them because they are doing it.”

Recall that the new tax laws have been surrounded by controversy, including allegations that their gazetted form was changed.