By Prof. Chiwuike Uba, Ph.D.
Recent public debate on whether tax authorities can lawfully direct banks to debit taxpayers’ accounts without a court order has brought the issue of the “power of substitution” back to the centre of Nigeria’s fiscal discourse. Some commentators have portrayed this authority as a radical expansion of state power. Yet both the Presidential Fiscal Policy & Tax Reforms Committee and the Lagos State Internal Revenue Service have clarified that the power is neither novel nor arbitrary. It is deeply rooted in Nigeria’s tax architecture, reflected in earlier statutes, and consistent with global best practice in modern revenue administration.
At the core of the controversy is Section 60 of the Nigeria Tax Administration Act, 2025, which expressly authorises the relevant tax authority, without an order of court and by notice in writing, to appoint any person as the agent of a taxable person where tax has become due and payable and remains unpaid, or where that person is in possession of, or is likely to be in possession of, funds belonging to the taxpayer. This provision forms the legal foundation for directives to banks or other third parties to remit taxpayers’ funds. The wording is deliberate. It establishes substitution as an administrative enforcement power rather than a judicial process, intended to secure payment of tax debts that are already legally due.
What is often missing from public discussion is that tax does not become “due and payable” by administrative whim. The Act devotes extensive provisions to assessments, service of notices, timelines for payment, and the rights of taxpayers to object and appeal. A tax liability only crystallises after formal assessment has been issued, properly served, and either accepted by the taxpayer or confirmed through the objection and appeal framework. Substitution therefore sits at the extreme end of a statutory chain that begins with inquiry and assessment, passes through objection and appeal, and only culminates in enforcement after legal finality. This architecture makes it impossible, in law, for substitution to operate as a first resort or discretionary revenue shortcut.
This legislative choice reflects a well-settled principle in revenue law. Tax recovery mechanisms operate with speed because money is mobile and easily dissipated. If every interception of funds required prior court approval, enforcement would be undermined, as defaulting taxpayers could move assets before proceedings are concluded. Nigeria’s approach aligns with jurisdictions such as the United Kingdom, South Africa, Canada, and Australia, where third-party or garnishee-type notices are routine administrative tools to recover confirmed tax debts.
The absence of prior judicial authorisation does not mean that substitution operates outside the courts’ control. Judicial oversight is structured as post-enforcement review rather than pre-enforcement permission. Subsection (5) provides that any notice issued under the section shall, for objections and appeals, be treated as if it were an assessment or demand notice. This ensures that taxpayers may challenge substitution through statutory objection processes, the Tax Appeal Tribunal, the Federal High Court, and appellate courts. Appointed agents, including banks, may also contest notices where no funds are held or directives were improperly issued. Substitution is thus fully justiciable.
When Section 60 is read with surrounding provisions, the structure becomes clearer. Substitution is embedded within a wider statutory ecosystem, preceded by information-gathering powers that allow the authority to trace funds and identify third parties holding taxpayer assets. It is not a speculative intrusion into private accounts but the enforcement endpoint of a lawful verification process. The Act also constructs a graduated enforcement ladder, with substitution as a comparatively restrained intervention, intercepting existing funds rather than seizing property or forcing sales. Proportionality, not absolutism, defines the process.
Both the statute and clarifications from the Presidential Fiscal Policy & Tax Reforms Committee stress that substitution is not a routine administrative shortcut. It is a last-resort recovery mechanism, activated only after inquiries, assessment, objections, notices, and, where relevant, judicial determination. The liability must be final and legally payable. Without these conditions, a substitution notice is vulnerable to objection, appeal, and judicial nullification. Substitution is remedial, not investigative, speculative, or punitive. It is firmly civil in nature, separate from criminal sanctions that address deliberate evasion or obstruction.
The policy rationale extends beyond revenue collection. A system in which final tax liabilities cannot be enforced rewards non-compliance, penalises honesty, and shifts fiscal burdens onto law-abiding taxpayers. Substitution protects compliant taxpayers and ensures equity by recovering lawful tax debts without redistributing the burden across society. While concerns about abuse are real in environments of fragile institutional trust, the Act embeds safeguards, including mandatory due process, objection rights, multi-tiered appeal channels, formal complaint structures, and oversight by the Tax Ombud. Substitution thus creates a regulated enforcement space, balancing speed with accountability.
Ultimately, Section 60 does not establish fiscal absolutism. It codifies a model where administrative efficiency and constitutional accountability coexist. By removing the need for prior court orders, the law protects public revenue from delay. By making substitution notices appealable, it ensures that the power remains contestable and judicially reviewable. Read within the full architecture of the Act, from assessment and information powers through recovery hierarchy to offences and taxpayer protections, substitution emerges not as coercion but as a coherent, sequenced, and legally disciplined tool for sustaining tax equity and preserving Nigeria’s fiscal credibility. The real policy choice is not between authority and rights, but between pre-enforcement paralysis and post-enforcement justice.
About the Author
Prof. Chiwuike Uba, Ph.D., is a Nigerian economist, policy expert, and consultant with over 25 years of experience in governance, public financial management, and international development. He has advised governments, international organisations, and institutions on fiscal policy, tax administration, and institutional reforms, and writes extensively on sustainable revenue systems in Nigeria.