The Labor government has been accused of being politically bullied into doubling a withholding tax for investors in managed investment trusts (MIT).
Member for Bradfield Paul Fletcher told an audience at last week's 2012 Financial Services Council conference that, in his view, the reason the government increased the tax from 7.5 per cent to 15 per cent was due to demands from the Australian Greens party.
"The hung parliament I think has been a disappointment to the Australian people because what they see is decisions being made on a fairly capricious basis with a view to making sure the Independents and the Greens continue to support the government," Fletcher said.
Fletcher, speaking as part of a breakfast session with Labor member for Robertson Deborah O'Neill, labelled the government's reversal on its tax promise in this year's federal budget in May, and a following June session in parliament as a "remarkable saga".
He said after Labor introduced legislation into parliament that contained a series of measures, including the MIT tax changes, the government amended the same legislation.
"Extraordinarily, the government amended its own legislation to withdraw that provision and then a week later they brought in a seperate piece of legislation which contained the same provision in identical terms to once again increase withholding tax to 15 per cent," he said.
"Why did that happen? It happened because the Greens jacked up about the increase and they wanted to have some negotiations with the government for outcome on other issues.
"The consequence of that on inward investor confidence in Australia is not hard to see if issues as central as the setting of withholding tax rates for foreign investment are captive to short-term political toing and froing between the Greens and Labor.
"That is not good news for international confidence in Australia as a place to invest."
In response to Fletchers accusations, O'Neill said: "I think taking the 30 per cent down was a very timely response during the GFC, bringing it back up to 15 per cent is a responsible response.
"But if we're going to move into confidence on overseas investors in Australia, if we're talking about that issue, then I think the biggest threat that we've seen in the last week has to be Tony Abbott's comments in China.
"The reality is we need foreign investment."
