![Former Westpac CEO Bob Joss has questioned the logic and reasoning behind the bank tax.](/content/dam/images/g/v/9/1/q/z/image.related.afrArticleLead.620x350.gwjuhv.png/1496550513769.jpg)
![Tony Boyd](http://web.archive.org./web/20170604145321im_/http://www.afr.com/content/dam/images/1/3/s/y/3/g/image.imgtype.afrAuthorAvatar.120x120.png/1425275986441.png)
Bob Joss, the American who turned around Westpac Banking Corp following its near death experience in the 1990s, has described the $6.2 billion bank levy as a "penalty tax" on the country's largest corporate taxpayers.
In an exclusive interview with The Australian Financial Review, Dr Joss questioned whether the tax would increase the resilience of the financial system.
He said the tax could be viewed as a tax on economic growth because the revenue goes up as banks provide increased loan finance.
Dr Joss, who is professor and dean emeritus at Stanford University's graduate school of business, questioned the basis of the tax.
"I think it is certainly questionable public policy, which arguably doesn't meet the standard tests of efficiency and equity for sound tax policy," he said.
"It is a very targeted tax – aimed at only five companies, which seems highly unusual in any country. It only taxes large domestic firms, and no other industry competitors, foreign or domestic.
"It is a tax on a principal 'raw material' of these five companies, intentionally raising their cost of doing business. It is not aimed at closing any tax loophole or avoidance scheme, as I believe these five firms are already among the largest taxpayers in Australia.
"So it certainly has all the attributes of a very targeted penalty tax."
Dr Joss, who was made a Companion of the Order of Australia last year, said the levy can be viewed as a tax on growth.
"The Australian economy relies on healthy credit availability for balanced growth; most credit is provided through the banking system and this levy directly and intentionally raises the cost of funding the holding of loans by these five major credit granting institutions," he said.
He said that rather than tax the banks, the government should have investigated its revenue problem.
"One can certainly argue that it might have been better practice to define the revenue problem needing solution, lay out the alternative ways of solving the revenue problem, and invite healthy debate over the pros and cons of each alternative," he said.
"Such a process usually produces the best outcome."
Dr Joss questioned the reasoning of Treasurer Scott Morrison, who said the tax would make the financial system more resilient.
"It is hard to understand how raising the cost of doing business makes that business more resilient, unless you are following the theory that training with extra weights makes you stronger once you compete without the weights," he said.
"But if that were the theory, then one would have expected this to be a temporary levy that expired after a certain period of time, which is not the case as proposed.
"If increased resilience were the goal, and this levy was truly thought to increase system resilience, then one would have thought the levy would apply to all those who participate in the financial system so that all were made more resilient."
He said investors had good reason to be concerned about the tax.
"I think any investor, foreign or domestic, would be concerned about such a targeted levy that might be applied to any small subset of companies in any industry – especially when those companies play such a key role in the country's economic development and health, and shoulder a major share of the tax burden already," he said.
Dr Joss also expressed surprise at Mr Morrison's comment that banks were an oligopoly that had acted to the detriment of Australian consumers.
"It suggests that perhaps the motivation for the levy is a sort of oligopoly tax," he said.
"But Australia has several industries that are highly concentrated – retailing, media, mining are but a few examples – and I don't think anyone is advocating industry concentration as a basis for some additional tax levy on any other industry.
"I also think the Australian financial system has proven to be one of the most sound and competitive in the world."