Westpac seeks bank levy changes

The federal government has been asked to include foreign banks in its proposed bank levy and incorporate a sunset clause.

Westpac has called for foreign banks to be subjected to a new levy. (AAP)

Westpac has called for foreign banks to be subjected to a new levy so domestic banks are not disadvantaged.

The Turnbull government is proposing to impose a 0.015 per cent levy on banks with total liabilities of more than $100 billion, starting on July 1, which will raise $6.2 billion over the next four years.

Westpac in its submission to a Senate inquiry into the levy said it was important in the interest of "international competitiveness" the levy be extended to foreign banks.

The bank said there should be a 2021 sunset clause and a mechanism to suspend the levy if a bank is under financial stress.

As well, the liability base should be narrowed to exclude products and transactions where the imposition of the levy could have "an adverse impact on liquidity and pricing".

"Westpac does not support the introduction of a new tax on Australia's major banks, which are already some of Australia's highest taxpayers," the bank said in its written submission.

"We believe the levy is questionable policy, and sets a poor precedent in tax policy."

The cost of the levy would have to be borne by customers, employees, shareholders and suppliers, it said.