Explained: What is the sovereign right to taxation?

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In this explainer, we look at the terms ‘sovereignty’, ‘sovereign powers’ and the ‘sovereign right to tax’.

What does ‘sovereignty’ mean?

The word sovereignty comes from the Latin word ‘superanus’, and is traditionally understood to mean “supreme power”.

Noted legal scholar John Salmond in his book Jurisprudence (1902) defines sovereign or supreme power as that “which is absolute and uncontrolled within its own sphere”.

“Within its appointed limits, if any, its exercise and effective operation are not dependent on or subject to the power of any other person. An act of sovereign power is one which cannot be prevented or annulled by any other power recognised by the constitution of the state.”

A sovereign state – like India – is one whose sovereignty is not diminished by any control exercised over it by any other state; meaning it has absolute and complete autonomy.

Sovereign power is contrasted with ‘subordinate’ power, which Salmond describes as that which “even in its own sphere of operation, is in some degree subject to external control. There exists some other constitutional power which is superior to it, and which can prevent, restrict, or direct its exercise, or annul its operation.”

What are ‘sovereign rights’?

Enlightenment-era philosophers Thomas Hobbes (1588–1679), John Locke (1632–1704) and Jean-Jacques Rousseau (1712–78) are considered to have made the most significant contribution to the concept of sovereign rights or powers as are understood today.

The English thinker Hobbes argued that a government must have absolute authority, and that these powers should neither be divided nor limited. As per the Stanford Encyclopedia of Philosophy, Hobbes included among these powers legislation, adjudication, enforcement, taxation and war-making, and believed that the loss of even one would hinder the effective exercise of the rest.

Locke and Rousseau built upon Hobbes’s concept of the “social contract” — meaning that the state is based on a formal or informal agreement among its members — and were followed in the 19th century by the English jurist John Austin, who argued that sovereign powers belong to a country’s parliament.

So, what is the ‘sovereign right to taxation’ in India?

In India, the Constitution gives the government the right to levy taxes on individuals and organisations, but makes it clear that no one has the right to levy or charge taxes except by the authority of law. Any tax being charged has to be backed by a law passed by the legislature or Parliament.

A document on the Ministry of Statistics and Programme Implementation website quotes the definition of tax as a “pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority”, and that a tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority”.

Taxes in India come under a three-tier system based on the Central, State and local governments, and the Seventh Schedule of the Constitution puts separate heads of taxation under the Union and State list. There is no separate head under the Concurrent list, meaning Union and the States have no concurrent power of taxation, as per the document.