Introduction
Tax authorities rely on various tools to enforce compliance and recover unpaid taxes. One of the most direct methods is distraint—a legal process where the tax authority seizes and sells a taxpayer's movable assets to settle outstanding tax liabilities.
In Nigeria, this enforcement mechanism has seen important changes over time. Notably, the 2011 amendment to the Personal Income Tax Act (PITA) introduced a safeguard: tax authorities could no longer carry out distraint actions on their own. Instead, they had to first obtain an ex parte court order—ensuring a layer of judicial oversight and protecting taxpayers' rights against arbitrary enforcement. However, the Nigerian Tax Administration Act 2025 (the "NTAA") seeks to make a significant change. Section 61 of the NTAA removes the requirement for tax authorities to obtain a court order before distraining a taxpayer's property. If enacted, this would mark a return to a more aggressive enforcement model, giving tax authorities quicker access to enforcement without judicial checks at the initial stage.
This article explains the history of distraint powers in Nigeria, examines what the change means for individuals and businesses, and compares Nigeria's approach with what is done in other countries. The goal is to help clients understand how this development may affect their tax risk and what safeguards they should consider.
What is Distrain?
The word "distrain" means "to take and detain personal property by distress as security for a debt, claim".1 Black Law Dictionary2 also defines distrain as "to force a person by the seizure or detention of personal property to perform an obligation".
According to ordinary English usage, "distrain" simply means "to seize and hold (property) to compel payment or reparation, as of debts." It may also be defined as "to seize the property of (a person) to compel payment of debts; distress,"3 or "to seize the property of an individual and retain it until an obligation is performed." In some contexts, particularly landlord-tenant relationships, it is "the taking of the goods and chattels of a tenant by a landlord in order to satisfy an unpaid debt."4
This broader interpretation was affirmed in First Bank v. Attorney General of Anambra State & Anor.,5 where Honourable Justice Kasim (as he then was) explained that distraining can include actions such as sealing off a business location as part of enforcement.
Legal Background: Distraint Powers Before and After the 2011 Amendment
How Distraint Worked Before 2011
Before 2011, tax enforcement in Nigeria gave wide powers to both State and Federal tax authorities. For instance, the Chairman of the Lagos State Internal Revenue Service (LIRS) could issue an executive warrant authorising tax officers to seize a taxpayer's goods, chattels, bonds, or securities to recover unpaid taxes—without needing a court's approval.6
A similar provision existed under the Companies Income Tax Act (CITA).7 While it gave tax authorities a quick path to collect unpaid taxes, it also raised concerns about the potential abuse of power and absence of procedural fairness.
2011 Reform: Judicial Oversight Introduced
To address these concerns, the Personal Income Tax (Amendment) Act, 2011, introduced significant procedural reforms. Under Section 104 of the amended PITA, the relevant tax authority must apply to a High Court ex parte to obtain an order for distraint8. The tax authority must convince the court that:
- The taxpayer received a proper tax assessment that became final and conclusive;
- A formal demand notice was served;
- The taxpayer failed to pay within the specified timeframe; and
- Enforcement through distraint was reasonably necessary.
This requirement aligned tax enforcement with Section 36 of the 1999 Constitution (as amended), which guarantees every Nigerian's right to a fair hearing.
The 2025 Nigerian Tax Administration Act (NTAA): A Step Backward?
The Act aims to modernize Nigeria's tax laws by consolidating various statutes, including PITA. Among its many provisions, Section 61 of the NTAA removes the requirement for tax authorities to obtain a court order before taking distraint action. Under this provision, tax officials would be empowered to issue distraint notices and execute warrants for the recovery of unpaid taxes without prior judicial involvement. This proposed change marks a return to the administrative model of enforcement that existed before the 2011 amendment to PITA. While the aim is to enhance efficiency and improve compliance outcomes, the proposal has generated discussion about the need to balance enforcement with adequate taxpayer protections.
Sections 36 and 44 of the 1999 Constitution guarantee every Nigerian the right to fair hearing and protection from unlawful deprivation of property. Historically, judicial oversight in distraint actions has served as an important safeguard—ensuring that enforcement measures are based on valid assessments, proper service of notices, and procedural compliance. The proposed shift raises questions about how to maintain this balance in the absence of court review. In particular, there are practical risks that may arise if the supporting administrative framework is not strengthened alongside this legislative change. These include the following:
- Ensuring Accuracy and Consistency in Tax Assessments: Tax assessments are expected to be based on objective criteria and reasonable estimates of liability. See Adeniran v Lagos Internal Revenue Service.9 Where there are gaps in communication, record-keeping, or data reconciliation, assessments may occasionally not reflect economic realities—particularly for small or informal businesses. Without judicial oversight, there may be fewer opportunities for independent review before enforcement proceeds.
- Irregular Service of Assessment Notices: Proper service of assessment notices is a condition precedent to any enforcement. Both Section 57 PITA10 and Section 40 of the NTAA require that the taxpayer be formally notified of the assessment and section 40 specifically includes the duty of the relevant tax authority to state in the assessment, the place where payment should be made and the rights of the taxable person before any distraint. However, service errors—such as delivering to an outdated address or unintended recipient—can sometimes occur, particularly in contexts where taxpayer records are incomplete or not up to date and these could have fatal consequences on the innocent taxable person who may never have been properly served with an assessment. In Fidelity Bank Plc v. FIRS11, the Court of Appeal stressed the need for strict compliance with service procedures, reinforcing that enforcement—such as account freezes or distraint—must follow proper notice. Failing to do so can infringe the right to fair hearing and may render the enforcement unconstitutional.
- Providing Clear Remedies for Enforcement Errors: The NTAA currently does not specify a remedy for taxpayers who may be subject to distraint in circumstances later found to be erroneous—such as where an assessment is successfully challenged or a notice was not effectively served. Establishing a statutory process for review or compensation in such situations could enhance trust in the system and reassure taxpayers that enforcement actions are both robust and accountable.
- Right to Object: A taxpayer's right to object to an assessment is central to ensuring fairness in tax administration. Section 58 of PITA12 and section 41 of the NTAA. provide for objections and reviews. But this right can only be meaningfully exercised if the taxpayer is properly notified of the assessment. Where notice is not received or is flawed, the taxpayer loses the chance to challenge the assessment before distraint is executed. Moreover, even where objections are submitted, the lack of clear procedures for independent review may weaken the effectiveness of the objection process. This concern reflects the principle established in Eze v. Federal Republic of Nigeria (1987) 2 NWLR (Pt. 56) 447, where the court emphasized that all administrative actions must meet constitutional standards of fair hearing and due process, even when acting within their statutory powers.
Comparative Analysis: International Best Practices in Tax Enforcement
A comparative look at international tax enforcement mechanisms highlights a consistent theme—a strong emphasis on due process and procedural safeguards before revenue authorities exercise enforcement powers, particularly when it comes to seizing assets or controlling property. As Nigeria considers reforms under the proposed Bill, these international approaches offer valuable guidance on how to align enforcement powers with constitutional protections and administrative accountability.
a. United Kingdom (UK)
The UK provides a structured model that balances enforcement efficiency with taxpayer protections. The older "distraint" system has been replaced by the "Taking Control of Goods" regime, introduced under the Tribunals, Courts and Enforcement Act 2007.
Under Part 3 and Schedule 12, enforcement agents acting on behalf of HM Revenue & Customs (HMRC) are required to follow a clear and transparent process. Taxpayers must receive a Notice of Enforcement at least seven clear days in advance, which must specify the amount owed, identify the certified enforcement agent, and explain the taxpayer's right to appeal, request a review, or propose a repayment plan.
Enforcement agents must also be certified and regulated under the Certification of Enforcement Agents Regulations 2014, ensuring professional standards and accountability throughout the process. The UK model demonstrates how procedural safeguards can support effective enforcement while maintaining public confidence.
b. United States
In the United States, the Internal Revenue Service (IRS) is empowered to levy a taxpayer's assets under the Internal Revenue Code (IRC), but this power is carefully regulated by Sections 6330 and 6331.
Before taking any enforcement action, the IRS must issue a Final Notice of Intent to Levy (Section 6331(d)) and allow a 30-day period for the taxpayer to respond. During this period, the taxpayer is entitled to a Collection Due Process (CDP) hearing (Section 6330(a)), which offers an opportunity to challenge the validity of the tax debt or propose alternative solutions—such as an installment agreement or an Offer in Compromise.
If the taxpayer is not satisfied with the outcome of the hearing, they may appeal to the U.S. Tax Court. This multi-layered process highlights the importance placed on transparency and access to redress before property is affected.
c. South Africa
South Africa adopts a similarly balanced approach under the Tax Administration Act, 2011, which guides the South African Revenue Service (SARS) in recovering outstanding tax debts.
Chapter 11 of the Act allows SARS to enforce collection either through a civil judgment (Section 172) or via administrative procedures, such as issuing a final demand and giving the taxpayer an opportunity to respond. In cases involving third-party recovery (e.g., instructing a bank to release funds), Section 179 requires a 10-business day advance notice, ensuring the taxpayer is adequately informed.
In addition, taxpayers have the right to object or appeal under Sections 104–107, with further escalation possible to the Tax Board or Tax Court. The framework reflects South Africa's deliberate effort to balance strong enforcement powers with meaningful procedural protections and accessible dispute resolution.
Conclusion
The power to distrain remains an essential tool in tax enforcement, but it must be exercised within a framework that protects constitutional rights and guarantees due process. While the Nigeria Tax Administration Act 2025 is a commendable effort to modernise the country's tax regime, it would benefit from the reintroduction of judicial oversight in distraint proceedings. Reinstating an oversight mechanism—such as a requirement for an ex parte court order, as previously provided under Section 104(3) of the amended PITA—would enhance accountability, reduce the risk of unlawful enforcement, and reinforce public trust in the system.
As Nigeria continues to refine its tax laws, it is essential that reforms strike the right balance between administrative efficiency and the protection of taxpayer rights. A well-designed enforcement framework must do both.
Footnotes
1. New International Webster's Comprehensive Dictionary 2010 Edition; op cit Abimbola Akeredolu SAN-The dynamics of Distraint.
2. Black's Law Dictionary Eighth Edition
3. http://www.thefreedictionary.com/distrain
4. Ibid
5. Vol. 4 ALL NTC Pg 437 at Pg 447
6. Section 104 (2) & (3) PITA Decree No. 104, 1993, Cap P8 Laws of the Federation, 2004.
7. Section 86 (2) & (3) CITA
8. See section 104 (3) PITA 2004 as amended in 2011.
9. (2021) 8 TLRN 22 (CA)
10. 2004 as amended
11. (2012) LPELR-9341(CA)
12. Ibid
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
