Report No. 60
10.20. Priority justified at present day only for taxes.-
As against these possible justifications, it must be remembered that every rule of priority created inequality and in a democratic country, provisions creating inequality can be permitted only within reasonable and justifiable limits. Having regard to these considerations, it appears to us that the principle of priority can, in modern times, be justified only to the extent to which it can be said to serve a public purpose.1 Such a public purpose can be predicated in respect of taxes and fees due to the State.
So far as taxes and fees are concerned, it is undeniable that the principle is necessary for the working of the governmental machinery. For that reason, the claims of the unsecured creditors have to yield to those of the State. At the same time, there is a basis for treating debts other than taxes and fees on a footing different from taxes. It is an accident that the particular debt accrues to the State. The general rule that none should have special privileges should be allowed to operate in the case of such debts.
1. Cf. para. 10.19, supra.