The big four banks each accept the tax will pass parliament but want amendments, including a sunset clause on the legislation when the budget returns to surplus and for the levy to be imposed on foreign banks as well.

“The Australian government should not create tax policy, which systematically and deliberately advantages banks based in the United States, Europe, Japan and China at the expense of its domestic industry,” Commonwealth Bank general counsel Anna Lenahan told senators in Canberra today.

Officials from Westpac, the ANZ and NAB all expressed concerns about the levy eroding their competitiveness, while warning the cost to each of their businesses could not simply be absorbed.

Treasurer Scott Morrison was quick to swat down the proposal for a sunset clause, saying the bank levy was a structural rather than a temporary measure.

“When we return to balance, as we’re projected to do in 2021, the bills don’t stop there. That’s why the tax doesn’t stop then. We need to get back into balance, and stay in balance,” he told reporters in Sydney.

The levy is set to apply to five big banks with total liabilities over $100 billion from July 1, with the proceeds applied to budget repair.

Macquarie Bank does not believe it should be slugged by the levy, given it holds less than 2 per cent of the national mortgage market and less than 1.5 per cent of the credit card market.

“We’d like to express our surprise the levy is applying to Macquarie Bank given our size and the benefit we bring to domestic competition and the role we play in bringing export income into the Australian economy,” chief executive Nicholas Moore said.

The Australian Bankers Association also took aim at the rationale behind the tax, as well as its design, raising questions about the revenue-raising target and fears it could be extended or increased in the future.

“Neither appropriate process have been followed or sufficient consultation been allowed,” ABA chief executive Anna Bligh told senators.

“The Government has changed the rationale for the levy on multiple occasions.”

Bligh criticised the Turnbull Government’s “truncated” approach to developing the tax and said her member banks had been promised but hadn’t received Treasury modelling underpinning the policy.

“This is an entirely new tax on activities that have never been taxed before on not just a single sector but five companies within that sector,” she said.

“Decisions have been made in a very short period of time without due consideration about how that might affect other parts of the banks involved.”

Taxing the big banks based in part on their success highlighted a worrying trend and the bill’s unintended consequences should not be taken lightly, Bligh said.

“The proposed new tax is an additional cost of doing business and it must be borne by savers, borrowers, bank employees or shareholders.”

The banks want a mechanism to suspend the levy if a bank is under financial stress and the liability base should be narrowed to ensure banks have enough liquidity in place to see out tough times.

Labor supports the levy, which is expected to pass the Senate next week.

-AAP