Bad news for people sending and receiving money transfers: These are the most affected countries
There is a minor piece of legislation inside President Trump’s “one big, beautiful bill” that targets immigrants’ remittances from the US with a new tax.
Republicans in the House of Representatives passed President Trump’s signature “one big, beautiful bill” in May. While the legislation is mainly focused on spending priorities and tax cuts, there is a minor section that includes a new tax intended to disincentivize immigrants wanting to come to the United States.
The provision would apply a tax on remittances that immigrants send back to there families. According to the most recent data, immigrants in the US sent $79 billion in 2022. That was more money than the federal government provided in foreign assistance that year.
The countries that would be most affect by the remittance tax
The vast majority of remittances sent from the US go to Mexico reports yahoo!news. In 2021 immigrants living in the US sent $52 billion in remittances which accounted for 4% of the nation’s gross domestic product. Upon learning about the measure Mexican President Claudia Sheinbaum condemned the proposal calling it a “tax on those who have the least.”
While Mexico receives the lion shar of remittances from the US, the impact of this provision would be felt more acutely in other small and poor countries. For example, in Nicaragua, Honduras and El Salvador over a quarter of GDP comes from remittances. That is also the case for Gambia and Liberia.
Top ten destinations for remittances from the US:
| Country | Remittances | |
|---|---|---|
| 1. | Mexico | $52 billion |
| 2. | India | $15.8 billion |
| 3. | Guatemala | $14.1 billion |
| 4. | Philippines | $12.8 billion |
| 5. | China | $12.7 billion |
| 6. | Dominican Republic | $8 billion |
| 7. | Vietnam | $ 7.9 billion |
| 8. | El Salvador | $6.7 billion |
| 9. | Honduras | $5.9 billion |
| 10. | Nigeria | $5.7 billion |
The remittance tax won’t raise much money
Detractors of the proposal say that not only would the tax hurt the poorest people around the globe, but that it also wouldn’t raise much money. The tax was originally put at 5% but it was reduced to 3.5%. It’s estimated that it could bring in $2.3 billion, Gabriela Siller, Director of Analysis at Banco Base told El País.
How much would the new tax cost immigrants?
- For example if you send $1,000, you’d have to pay an extra $35 in tax—on top of whatever service fees the transfer company charges.
That represents only 0.04% of total US government revenue. She thinks that “it is even possible that the measure will generate greater caution and limit the growth of migrant consumption in the US.”
There is the likelihood that immigrants would seek ways to bypass the tax by using cryptocurrencies or other methods to get money back to their families. This in turn could create obstacles for the government in its efforts to stop illegal immigration.
Additionally, the proposal could be self-defeating as remittances are credited with keeping people living in poor and rural areas from migrating themselves too.
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