Taiwo Oyedele, the Chairman of the Presidential Fiscal and Tax Committee, recently announced a push to expand Nigeria’s tax net and drive compliance through advanced data monitoring.
The system aims to flag significant discrepancies between the income an individual declares and their observable lifestyle expenditure.
Oyedele explained, “The system will validate your spending against your declared income. For instance, if an individual declares an annual income of only N1 million but their lifestyle, evidenced by the purchase of a new car, multiple international trips, and frequent high-value purchases, which suggests expenditures closer to N50 million, a substantial discrepancy is triggered.”
This approach leverages a legal principle known as Best of Judgement (BOJ) Assessment or Presumptive Tax Assessment.
Read also: Investors rethink wealth building strategy on Capital Gains Tax fears
This method allows the tax authority to estimate income and assess tax when a taxpayer’s records are unreliable or non-existent, compelling the taxpayer to explain the source of their wealth.
Clarifying the Power to Debit Bank Accounts
The Chairman further stated that once a tax liability is established, the government could enforce collection directly from bank accounts.
“If you cannot explain yourself and your tax is N1 million, under this new tax law from next year, if you have a bank account, we can debit your bank account. Once you’ve been given the due process to explain yourself and you refuse, the government can substitute what you have to collect the taxes you owe,” he said.
This statement, particularly the mention of direct bank debit, has caused significant public concern that the government could unilaterally withdraw money or monitor all citizens’ private inflows.
However, tax experts insist this enforcement power is not new and is strictly regulated by due process.
Adedapo Adeduro, a tax consultant, explained that the provision on bank accounts has existed since the 2007 Federal Inland Revenue Service (FIRS) Establishment Act and is now consolidated under the new legal framework.
Adeduro said that the enforcement is subject to the tax liability being established as ‘due’ and ‘payable’ (Subsection 1(a)). This means the tax cannot be collected without a lawful assessment and a defined period for payment.
He said that Subsection 5 confirms that the account debit is subject to a formal assessment process. “Nobody, not even the President, can just wake up and debit your account; there is a process.”
Adeduro said that the mandatory due process, the process which protects the taxpayer before any debit or enforcement action, includes the issuance of a formal assessment.
“ When a tax authority issues an assessment or BOJ, you have 30 days to respond. If you don’t, it may become final and conclusive, and they can take legal steps for recovery. If you respond, the matter stays open until both parties agree on the liability and you pay. If there’s no agreement, the FIRS can issue a NORA (Notice of Refusal to Amend), which is a final assessment,” Adeduro said.
“ At that point, a taxpayer has three options: Pay the NORA, go to the Tax Appeal Tribunal, from 2026, seek mediation from the Office of the Tax Ombud, especially helpful for small taxpayers who cannot afford professionals for the tribunal,” he clarified.
“ Only after these avenues are exhausted can money be recovered from your bank account,” Adeduro said.
Read also: Black Tax: Nigeria’s invisible levy on success
Another major point of public confusion is the relationship between the Tax Identification Number (Tax ID) and the government’s enforcement powers.
Olamide Olaniran, a Senior Tax Associate at KPMG, clarified that the Tax ID system is an administrative tool, not an enforcement weapon.
“If there is ever a valid reason to freeze or debit an account, it can only occur through a separate legal process, such as a formal tax assessment, notice of liability, and enforcement order issued under existing tax laws. The Tax ID itself does not grant such powers,” Olaniran said.
He explained that the true objective of Section 8 of the Nigeria Tax Administration Act (NTAA) is compliance and registration. To expand the tax net, ensure every taxable person is properly registered, and improve traceability.
The NTAA requires every taxable person to state their Tax ID on: All tax returns and correspondence. Any document prepared or issued in respect of a transaction. As a condition for entering into contracts with any government entity.
Banks and financial institutions are therefore required to request a Tax ID from taxable persons when opening or maintaining accounts, but individuals who do not earn income and are not classified as taxable persons are exempt from this obligation.
