Government MPs voted down the government’s own multinational taxation legislation in a bid to defeat Senate amendments that would have restored tax transparency obligations for private Australian businesses.

Last month, Parliament passed legislation that unwound changes put into place under Labor in 2013 that required Australian-owned private companies with revenues of over $100 million per year to report tax return information such as reported total income, taxable income and tax payable.

The reason why the estimated 700 companies — the government has not yet disclosed exactly how many or which companies would be affected — should have their tax data hidden remained unclear. The government at the time of introducing the legislation said it was in response to complaints from companies that disclosing the data was leading to executives of these privately held companies to be harassed or threatened.

Crikey reported in October that there was very little evidence to suggest such risks exist. The Australian Federal Police have not been consulted on any kidnapping threat, and the only company to raise the issue in a public submission to a parliamentary inquiry on the legislation was the part-US-owned meat company Teys Australia. Additionally Crikey reported that one of the groups, Family Office Institute, was only created this year, and seemingly resided out of the office of law firm Speed & Stracey, which also assisted with the Law Council of Australia’s work for the inquiry.

After a similar Fairfax report on the Family Office Institute this week that accused Family Office Institute of “astroturfing”, independent Senator Nick Xenophon withdrew his support for backing removing the reporting obligations — after they had already been removed — and backed amendments to the government’s legislation to crack down on multinational tax avoidance.

Xenophon said he originally supported the measure because he had spoken privately to people in the “food processing sector” who told him that it would put them at a competitive disadvantage against Coles and Woolworths. He later said that the argument the government made about kidnapping threats were subsequently — although highlighted by Crikey before the passage of the legislation — found to be  “fatuous”.

“It was a try on. It was an argument that didn’t make sense,” Xenophon said in Parliament on Tuesday. The tipping point was the revelations about Family Office Institute, he said.

“It appears that the Family Office Institute Australia actually has no members. It appears that the institute was established in August by two lawyers and a Canberra lobbyist who represent some of Australia’s wealthiest individuals with the Australian tax office … I am embarrassed that I was not aware of that — and I should have been. When a community group or organisation gives evidence before a committee, you generally expect that they are part of a larger grassroots movement or represent a number of businesses and are a genuine committee organisation. I cannot say that about the Family Office Institute.”

Xenophon pointed out that companies that earn more than $25 million in revenues need to disclose similar taxation information to ASIC, and that data is easily obtained just by paying $38 to ASIC. The amendments, proposed by Greens Senator Peter Whish-Wilson, to restore the register for private Australian-owned companies earning over $100 million in revenues to report their tax information passed the Senate on Wednesday night, but were opposed by the government.

When it returned to the House of Representatives on Thursday morning, the government voted down its own legislation. Treasurer Scott Morrison accused Labor of “playing politics” over the legislation, which Morrison said was “a cobbled-together, last-minute, back-of-the-envelope amendment”. He said the senators who changed their mind were flip-flopping.

“These admissions by certain senators that they got it wrong a few weeks ago provide me with no confidence that these same senators are now able to make a clear decision on this incredibly important area of law.”

While the government voted down its own legislation, Morrison said he would meet with the Commissioner of Taxation next week to discuss whether there was merit to the proposal to restore the transparency that was only wound back three weeks ago.