28/01/2026
𝐅𝐀𝐐𝐬 𝐨𝐧 𝐏𝐨𝐰𝐞𝐫 𝐨𝐟 𝐒𝐮𝐛𝐬𝐭𝐢𝐭𝐮𝐭𝐢𝐨𝐧 𝐢𝐧 𝐓𝐚𝐱 𝐀𝐝𝐦𝐢𝐧𝐢𝐬𝐭𝐫𝐚𝐭𝐢𝐨𝐧
𝑸1: 𝑾𝒉𝒂𝒕 𝒊𝒔 "𝒑𝒐𝒘𝒆𝒓 𝒐𝒇 𝒔𝒖𝒃𝒔𝒕𝒊𝒕𝒖𝒕𝒊𝒐𝒏"?
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. This power is only exercised after all legal and administrative processes, including appeals to the courts, have been exhausted.
𝑸2: 𝑰𝒔 𝒕𝒉𝒆𝒓𝒆 𝒂 𝒓𝒊𝒔𝒌 𝒐𝒇 𝒂𝒓𝒃𝒊𝒕𝒓𝒂𝒓𝒚 𝒖𝒔𝒆 𝒐𝒇 𝒕𝒉𝒊𝒔 𝒑𝒐𝒘𝒆𝒓?
No. The power of substitution is neither arbitrary nor discretionary. Its use is strictly governed by due process and can only be invoked after all established processes involving enquiries, assessments, objections, final notice, and appeals to the courts have been concluded, and the tax liability has become final and conclusive. It serves as a rigorously controlled, last-resort, not a routine administrative action.
𝑸3: 𝑫𝒐𝒆𝒔 𝒕𝒉𝒊𝒔 𝒂𝒇𝒇𝒆𝒄𝒕 𝒍𝒐𝒘-𝒊𝒏𝒄𝒐𝒎𝒆 𝒆𝒂𝒓𝒏𝒆𝒓𝒔 𝒐𝒓 𝒔𝒎𝒂𝒍𝒍 𝒃𝒖𝒔𝒊𝒏𝒆𝒔𝒔𝒆𝒔?
Individuals earning the national minimum wage or small businesses operating below applicable taxable thresholds are outside the scope of this measure. The power of substitution is only worthwhile where there is a substantial tax liability, which these groups generally do not have under the new tax laws.
𝑸4: 𝑰𝒔 𝒕𝒉𝒆 𝒑𝒐𝒘𝒆𝒓 𝒐𝒇 𝒔𝒖𝒃𝒔𝒕𝒊𝒕𝒖𝒕𝒊𝒐𝒏 𝒂 𝒏𝒆𝒘 𝒑𝒓𝒐𝒗𝒊𝒔𝒊𝒐𝒏 𝒊𝒏 𝑵𝒊𝒈𝒆𝒓𝒊𝒂𝒏 𝒕𝒂𝒙 𝒍𝒂𝒘𝒔?
No. This power is not new. It has been an existing provision of Nigeria’s tax legislation, including section 50 of the repealed Personal Income Tax Act (PITA) and various other tax statutes.
𝑸5: 𝑰𝒔 𝒕𝒉𝒊𝒔 𝒂 𝒈𝒍𝒐𝒃𝒂𝒍𝒍𝒚 𝒂𝒄𝒄𝒆𝒑𝒕𝒆𝒅 𝒑𝒓𝒂𝒄𝒕𝒊𝒄𝒆?
Yes. The use of third-party collection mechanisms is consistent with global best practices in tax administration. Similar powers, such as issuing garnishment or third-party payment notices, are common in tax jurisdictions worldwide to recover confirmed tax debts.
𝑸6: 𝑾𝒉𝒚 𝒊𝒔 𝒕𝒉𝒊𝒔 𝒑𝒐𝒘𝒆𝒓 𝒏𝒆𝒄𝒆𝒔𝒔𝒂𝒓𝒚?
This power is essential for maintaining fairness within the tax system. Without effective enforcement tools, compliant taxpayers are unfairly burdened, tax evasion is inadvertently encouraged, and government finances face undue pressure, which can lead to higher tax rates for all.
𝑸7: 𝑼𝒏𝒅𝒆𝒓 𝒘𝒉𝒂𝒕 𝒄𝒐𝒏𝒅𝒊𝒕𝒊𝒐𝒏𝒔 𝒄𝒂𝒏 𝒕𝒉𝒆 𝒕𝒂𝒙 𝒂𝒖𝒕𝒉𝒐𝒓𝒊𝒕𝒚 𝒆𝒙𝒆𝒓𝒄𝒊𝒔𝒆 𝒕𝒉𝒊𝒔 𝒑𝒐𝒘𝒆𝒓?
The power of substitution is strictly a last-resort measure and requires the simultaneous fulfillment of the following three conditions:
Exhausted process - the entire process for establishing a tax liability (enquiries, assessment, objection, final notice, and appeal involving the court) has been concluded.
Final liability - the taxpayer has a confirmed, final tax liability that is legally due and payable.
Refusal to pay - the taxpayer has failed, neglected, or refused to pay the debt within the written period specified by the tax authority.
𝑸8: 𝑾𝒉𝒐 𝒄𝒂𝒏 𝒃𝒆 𝒂𝒑𝒑𝒐𝒊𝒏𝒕𝒆𝒅 𝒂𝒔 𝒂 '𝒔𝒖𝒃𝒔𝒕𝒊𝒕𝒖𝒕𝒆' 𝒐𝒇 𝒂 𝒅𝒆𝒇𝒂𝒖𝒍𝒕𝒊𝒏𝒈 𝒕𝒂𝒙𝒑𝒂𝒚𝒆𝒓?
The tax authority can issue a notice of substitution to any person who holds funds belonging to, or owes sums of money due to the defaulting taxpayer.
𝑸9: 𝑾𝒉𝒂𝒕 𝒂𝒓𝒆 𝒕𝒉𝒆 𝒐𝒃𝒍𝒊𝒈𝒂𝒕𝒊𝒐𝒏𝒔 𝒐𝒇 𝒂 𝒔𝒖𝒃𝒔𝒕𝒊𝒕𝒖𝒕𝒆, 𝒂𝒏𝒅 𝒄𝒂𝒏 𝒔𝒖𝒄𝒉 𝒂 𝒑𝒆𝒓𝒔𝒐𝒏 𝒅𝒆𝒄𝒍𝒊𝒏𝒆 𝒕𝒉𝒆 𝒂𝒑𝒑𝒐𝒊𝒏𝒕𝒎𝒆𝒏𝒕?
Upon receiving a notice of substitution, the appointed party is statutorily obligated to either comply or formally object in writing within 30 days. The objection must specify the grounds for refusal. The legal provisions for appealing tax assessments are also applicable to the substitution notice.
𝑸10: 𝑾𝒉𝒂𝒕 𝒂𝒓𝒆 𝒕𝒉𝒆 𝒔𝒑𝒆𝒄𝒊𝒇𝒊𝒄 𝒔𝒂𝒇𝒆𝒈𝒖𝒂𝒓𝒅𝒔 𝒕𝒐 𝒑𝒓𝒆𝒗𝒆𝒏𝒕 𝒕𝒉𝒆 𝒂𝒃𝒖𝒔𝒆 𝒐𝒇 𝒕𝒉𝒊𝒔 𝒑𝒐𝒘𝒆𝒓?
Various legal and administrative safeguards exist to ensure the power is controlled, subject to review, and accountable including:
Due process - a mandatory due process for establishing the final tax assessment.
Right to object - a statutory right for the substitute to object in writing within 30 days.
Appeal rights - comprehensive appeal rights under the established tax dispute resolution framework.
Taxpayer rights - protection for the taxpayer or appointed agent by the Office of the Tax Ombud.
𝐂𝐨𝐧𝐜𝐥𝐮𝐝𝐢𝐧𝐠 𝐌𝐞𝐬𝐬𝐚𝐠𝐞
The power of substitution, including its framework under the new tax laws, is a carefully controlled mechanism designed to ensure equity in the tax system. It is not punitive, arbitrary, or intended for routine administration, which is why its use has been historically rare. It exists to ensure that confirmed and lawful tax debts are ultimately paid by those who may choose to ignore their statutory obligations.
-𝘗𝘳𝘦𝘴𝘪𝘥𝘦𝘯𝘵𝘪𝘢𝘭 𝘍𝘪𝘴𝘤𝘢𝘭 𝘗𝘰𝘭𝘪𝘤𝘺 & 𝘛𝘢𝘹 𝘙𝘦𝘧𝘰𝘳𝘮𝘴 𝘊𝘰𝘮𝘮𝘪𝘵𝘵𝘦
