New Law Mandates Banks, Financial Institutions to Recover Tax From Defaulters
- A new provision in the Nigeria Tax Administration Act (NTAA) now mandates banks and financial institutions on tax debt recovery
- The new legislation, which was signed by President Bola Tinubu, empowers other third-party agents to recover outstanding tax debt
- According to the NTAA, the tax authority can assign debt recovery duties to accredited third parties, including banks and debt recovery firms
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
A new provision under the Nigeria Tax Administration Act (NTAA) is changing how tax debts are recovered in the country.
The legislation empowers banks and other financial institutions to act as third-party agents in the recovery of outstanding tax debts, especially when all traditional legal avenues have been exhausted.
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When debt collection becomes bank business
This move is seen as part of a broader strategy to modernise Nigeria’s tax collection system and boost government revenue, in line with President Bola Tinubu’s economic reform goals.
According to the NTAA, the tax authority can assign debt recovery duties to accredited third parties, including banks, debt recovery firms, or other licensed entities, but only under certain conditions. These include:
When all legal recovery processes, such as court orders and payment notices, have failed
When the debt is significant in value
When the tax has remained unpaid for a prolonged period
In these cases, the law permits the tax authority to formally delegate the collection responsibility to a third party.
Taxpayers must be officially notified
The law also protects taxpayers’ rights by ensuring transparency during the process.
Before a third party steps in, the affected taxpayer must receive a written notice detailing the name and responsibilities of the agent assigned to their case.
This ensures that debt recovery does not happen without the taxpayer being aware of the new arrangement.
Importantly, the NTAA gives the tax authority the right to revoke the assignment at any time, returning control to itself if needed.
Not just FIRS, states included too
Responding to concerns that the new approach may diminish the authority of existing tax bodies, Dare Adekanmbi, spokesperson of the Federal Inland Revenue Service (FIRS), clarified that the move does not weaken the power of the revenue agencies.
Instead, it modernises how debts are collected and allows for state tax agencies to also benefit.
“The term ‘relevant tax authority’ covers not just the FIRS but also state inland revenue boards,” he said.
“In other words, your state revenue office could soon be working with your bank to collect what you owe, ” he stated.
Experts warn about implementation details
According to a report by TheCable, while experts agree that using third parties, especially banks, could speed up tax debt recovery, they caution that execution must be carefully managed.
An economist familiar with the FIRS’s previous operations noted that the agency had always involved third parties during tax audits, but never with full recovery powers.
He expressed concern over how well banks and financial institutions are prepared to handle sensitive tax data and manage complex legal processes.
What this means for Nigerians
For regular Nigerians, this policy means that banks could soon play a more active role in tax enforcement.
If you owe taxes and fail to resolve them through standard channels, your account may no longer be just a place to save; it could be where tax debts are settled, too.
With proper checks and balanced enforcement, the law could help increase compliance without unnecessarily burdening honest taxpayers.
Items exempted from VAT in the new tax law
A prior report by Legit.ng showed items that have been exempted from VAT payment in the new Tax Reform laws.
The Nigeria Tax Act, part of four major fiscal bills signed on June 26, 2025, is designed to reduce the cost burden on citizens and stimulate growth in strategic sectors.
Source: Facebook
The law is expected to take effect on January 1, 2026, and will be implemented by the newly established Nigeria Revenue Service (NRS), which replaces the Federal Inland Revenue Service.
FG orders banks to report monthly transactions
Legit.ng earlier reported that the federal government has directed banks and financial institutions to begin submitting monthly reports of transactions exceeding N25 million for individuals and N100 million for corporate entities to the tax authorities.
This directive is part of new provisions under the Nigerian Tax Act, which also mandates financial institutions to file quarterly reports with the Federal Inland Revenue Service (FIRS).
Notably, the agency is set to be renamed the Nigeria Revenue Service (NRS) starting January 2026, when the revised tax framework becomes effective.
Proofreading by James Ojo, copy editor at Legit.ng.
Source: Legit.ng
