Taxation and Insolvency: Towards a Foundational Understanding 

Abstract

Taxation and insolvency laws, as critical economic legislations, play a key role in regulating economic activities. This article aims to chart a path toward understanding the source of the divergences between these two fields at a foundational level by examining their theoretical roots. The theoretical foundations of tax law that have formed the current principles of taxation have been examined against the backdrop of the creditor's bargain and communitarian theories of insolvency. In India, the right of the State to tax corporations and individuals is espoused by the Constitution of India. This right is examined against the broader objectives of India’s Insolvency and Bankruptcy Code, 2016 (IBC/Code). In the last few years, there have been several cases in India, specifically on tax disputes during the insolvency resolution process. Examining the theoretical interplay between tax and insolvency enables us to see how insolvency and taxation laws could synergise and create positive outcomes for stakeholders. 

Keywords: Insolvency and Tax, Communitarian Theory, Creditors Bargain Theory