Why P-notes now?

The finance minister's clarification that participatory notes (PNs) will not be taxed marks an unfortunate about-turn on an earlier major policy decision to work towards eliminating PNs. It might have won markets a brief reprieve but at an exceptionally high long-term cost. In a milieu where there are virtually no restrictions on capital market investments by foreigners, we ought to be asking ourselves why investors need the cover of PNs at all. When they are free to enter boldly through the front door, where is the need for them to slink in through the back door, as it were? For, that is what PNs allow you to do. They allow investors to invest with minimal disclosure, especially regarding the source of funds.

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