From Kautilya to Contemporary Taxation: Re-examining Ancient Indian Economic Wisdom for Tax Morality and Voluntary Compliance

Abstract

Tax systems rest on a quiet bargain: citizens pay because they believe the state is fair, competent and restrained. This review re-reads Kautilya'sArthashastra, the Sanskrit treatise on statecraft whose final form modern scholarship places in the early centuries of the Common Era, as an early theory of that bargain, and tests it against contemporary research on tax morale and voluntary compliance. Drawing on critical translations of the text, the behavioural and economic literature on compliance, and official Indian legislation and revenue data available to October 2026, the article maps six Kautilyan principles (limited taxation power, ripeness of extraction, remission in distress, official integrity, record-based administration and graduated deterrence) onto modern constructs such as the slippery slope framework, procedural justice, third-party reporting and cooperative compliance. The review finds a strong structural parallel but also clear limits: the Arthashastra is a realist manual that pairs restraint with surveillance, so it cannot be read as a ready-made ethic of voluntarism. India's recent turn to simplified law under the Income-tax Act, 2025, faceless and data-driven administration, and rising direct-tax collections suggest that trust-building and enforcement are now being pursued together, as the text recommends. The article closes with a policy and research agenda for embedding dharma-informed fairness, service quality and transparent accountability in digital tax administration.