Allen is on the books of Liverpool at the moment, but he has been linked with moves away from the Merseyside outfit in the summer transfer window.
According to a recent report in The Daily Mail, Swansea, Leicester City, Stoke City, Bournemouth and Sevilla are all interested in securing the services of the Wales international midfielder this summer.
Taylor, who played with Allen at the Swans and is currently on international duty with him for Wales at the ongoing 2016 European Championship in France, is open to the return of the 26-year-old to the Liberty Stadium.
“He’s going to cost a lot more money now, isn’t he, so I don’t know,” the Swansea left-back told The Times about Allen.
“God knows, we’d love to have Joe back at Swansea. But I think the fact of the matter is a lot of clubs will want him.”
Allen scored two goals and created 12 chances in 19 Premier League appearances for Liverpool during the 2015-16 season.
The Wales international midfielder has a pass accuracy of 84% and a shot accuracy of 44%, and won three headers, seven dribbles and 19 tackles.