Ok Alliances can have a 0% tax rate, that works with your idea of ally with no tax or fee. If i were the leader of an alliance i would not have tax, that's beside the point.
Sovereignty is where you basically take the inhabitants of a square next to you and make them work for you, you have to pay them as they don't just work for free, they are like peasants, you need to influence them and make them like you by paying them to do your work.
Indeed it would be nice if the people on Sov. square didn't take as much upkeep overtime because they would begin to respect you and not demand as much gold because they no longer would feel as if you were a slave driver with no mercy, but it doesn't work like that. you have to pay the to do your work.