Following its earlier expression of interest to go after alleged tax defaulters with huge funds in Nigerian banks, the Federal Inland Revenue Service (FIRS) recently started issuing letters to commercial banks, appointing them as tax collection agents for such customers. The letters contain directives to the banks to freeze the named accounts in order to facilitate tax recovery. This mode of tax recovery through third parties, known as ‘tax substitution,’ especially with the account-freezing dimension that FIRS introduced to it, has raised diverse reactions from various commentators. Some view the measure as a laudable scheme with good prospects of raising substantial revenue for government and blocking tax leakages. Others air their reservations on the appropriateness of FIRS’ approach when viewed in the mirror of relevant laws and its far-reaching economic implications for the Nigerian investment climate. This article identifies and responds to the legal controversies of tax enforcement through tax substitution with a highlight on the status and role of the notice appointing banks as taxpayers’ agents.
