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Economic Times
20-05-2025
- Business
- Economic Times
Trump's 'One Big Beautiful Bill Act': How remittance tax plan might deliver a big economic blow to US allies?
AP This is not Trump's first attempt to tax remittances A new tax has been proposed in the United States one that is aimed at these remittances specifically. A US bill proposes a 5% excise tax on any remittances that originate in the US to any other country. The bill would levy a 5% tax on remittances for non-citizens and foreign nationals. That's on top of a roughly 5% to 10% fee already charged on the payments by senders like Western Union Co. and MoneyGram International Inc., services migrants in the US use to send money to family members back home. US President Donald Trump's 'One Big Beautiful Bill Act' would make sending money back home more expensive for thousands of Indian residents and non-resident Indians (NRIs) living in America. A Republican proposal to tax remittances could deliver a significant economic blow to some of the United States' poorest neighbors, including key allies of Donald Trump. The proposed tax would directly target financial transfers that account for roughly one-fifth of El Salvador's GDP, according to Salvador's President Nayib Bukele, who enjoys close ties with Trump by accepting deportees into domestic custody, would face economic strain. Honduras — home to a US military base that facilitates deportations to Venezuela — is similarly dependent on remittances, with Guatemala not far behind.'This isn't good news for those who rely on remittances,' Carlos Acevedo, former head of El Salvador's central bank told Bloomberg. 'It could negatively impact economic growth.' ALSO READ: Trump's 'one big, beautiful bill' offers $1k for newborns, immigration and tax cuts: 10-point explainerMigrants from El Salvador, Guatemala, and Honduras sent record levels of remittances last year, helping fuel economic activity in Central America. Since Trump's inauguration in January, remittance flows have surged as migrants, anticipating deportation, have increased the amounts they send home as these funds are vital for consumption among poor families with limited income sources. Mexico and Central America remain among the most remittance-dependent regions globally.'The impact is both macroeconomic and microeconomic,' said Alvaro Gonzalez Ricci, head of Guatemala's central bank. 'Remittances are increasingly important not just as a share of GDP but as a driver of household consumption.'Gonzalez Ricci noted that migrants in the US may bear the cost of the tax, minimizing its impact on Guatemala's remittance inflows. He added that states with sanctuary cities are likely to oppose the Manuel Orozco, a remittance expert at the Inter-American Dialogue in Washington, estimated the tax could reduce remittance volume and transactions by around 10%.'That's the best-case scenario,' he said. 'If implemented, many people could turn to cryptocurrency or ask U.S. citizen relatives to send money on their behalf.' ALSO READ: Putin shocks Trump, says 'We like Melania better'; US President then shares his hilarious response Mexico's Foreign Affairs Minister Juan Ramón de la Fuente said the country would mount legal and political opposition to the proposal. In a May 13 letter to House members, Ambassador Esteban Moctezuma Barragán argued that the tax would amount to double taxation for migrant workers, who already pay U.S. income taxes. In 2021, Mexicans working in the U.S. paid $121 billion in taxes, the ambassador noted.'Taxing remittances would disproportionately impact the most vulnerable, ignoring their limited ability to pay,' Barragán wrote. 'These workers migrated out of necessity and contribute meaningfully to the U.S. economy. We respectfully urge reconsideration.'Officials from El Salvador and Honduras declined to comment on the Electronic Transactions Association, representing digital payment providers, also urged lawmakers to reconsider their decision. The group warned the tax could harm unbanked populations who rely on cross-border payments and may push them toward unregulated financial channels. ALSO READ: White House study raises alarm: 9 million Americans could lose health insurance in 'major' recession if... 'These services are essential, not luxuries,' the association said in a May 8 letter. 'They help people pay bills, support families abroad, and manage daily expenses. Taxing remittances punishes those who can least afford it.'This is not Trump's first attempt to tax remittances. A similar initiative during his first term failed due to legal and logistical issues in distinguishing between worker remittances and commercial payments, according to Barclays analysts Gabriel Casillas and Nestor is currently the only US state with a remittance fee: $5 on wire transfers under $500 and 1% on amounts over that threshold. Introduced in 2009, the policy generated $5.7 million in its first year and $13.2 million in the latest fiscal enacted, the renewed federal push could lead to currency devaluation in Guatemala, Honduras, and Mexico. However, remittance flows have proven resilient, even during crises like the COVID-19 pandemic. According to Barclays, such a tax would likely cause a short-term disruption rather than a long-lasting decline in remittances. ALSO READ: 'I'll shove it up their...': Trump says nobody gonna mention that he got Olympics and Fifa World Cup The 'One Big Beautiful Bill Act' proposes a 5 per cent tax on all international money transfers made by non-US citizens, including non-immigrant visa holders (like H-1B) and green card holders. If passed, the law would withhold 5 per cent of the remitted amount at the point of transfer. No exemption threshold limit has been set, meaning it would even apply to transfers of small section on remittances in the 1,116-page legislation, however, specified that the 5 per cent clause will not apply to any remittance transfer by a 'verified US sender', meaning if the sender is a US citizen or national of the United States. The law could come as a massive financial blow to nearly 45 lakh Indians living in the US, including nearly 32 lakh persons of Indian Origin.
Indian Express
19-05-2025
- Business
- Indian Express
Top 5 cities account for over 52 pc of Mutual Fund assets, women investor base rises
India's mutual fund assets are heavily concentrated in the top five cities, with Mumbai, New Delhi, Bengaluru, Pune, and Kolkata collectively accounting for a staggering 52.52 per cent of the country's total mutual fund assets under management (AUM) as of March 2025. This means as much as Rs 34.52 lakh crore of total AUM corpus of Rs 65.74 crore came from these five cities. Mumbai, the financial capital, leads the pack with a 27 per cent share (Rs 17.75 lakh crore), followed by New Delhi with 12.63 per cent, Bengaluru with 5.39 per cent, Pune with 4 per cent and Kolkata with 3.49 per cent. This trend is consistent with the previous year's data, according to the Association of Mutual Funds in India (AMFI). The dominance of these cities highlights the skewed distribution of mutual fund investments in India. 'Since most of the corporates are headquartered in these five cities, their investments (in mutual fund schemes) also get accounted there. This is the reason that the numbers are always skewed,' said A Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life Mutual Fund. The MF industry had a total of 5,34,20,840 unique investors as of March 2025; of this, 25.91 per cent (or 1,38,40,740) were women. This represents a marked increase from 24.2 per cent in March 2024, underscoring the growing financial independence and awareness among women. 'The rise in literacy rates and the growing presence of women in the workforce have been instrumental in enhancing their economic contributions and, as a result, women are now emerging as a key participant in the MF investor base,' AMFI said in its Annual Report. Individual investors, including high-net-worth individuals, retail investors and non-resident Indians (NRIs), hold 63.2 per cent of the total industry AUM (Rs 65.74 lakh crore) – consistent with the previous year's trend (63.4 per cent). As of March 2025, individual investors hold 65 per cent of AUM in equity funds, 18 per cent in hybrid funds, 9 per cent in debt funds and 7 per cent in passive funds, it said. According to AMFI, a notable observation is that in most states, individual investors accounted for more than 63 per cent of the MF AUM, with the exceptions being New Delhi (52.77 per cent) and Maharashtra (48.22 per cent). In fact, in several states –Lakshadweep, Tripura, Daman and Diu, Andaman and Nicobar Islands, Arunachal Pradesh, Bihar and Puducherry – individual investors dominate with over 95 per cent of AUM. The investment landscape has evolved over the years, with shifting investment preferences among individuals across different age brackets. A key trend observed in the net flows is the increased risk appetite of investors, who are seeking higher returns. 'Data shows a shift towards more aggressive investment strategies, particularly among younger investors, whereas older investors prioritise risk management through diversification,' AMFI said. AMFI analysis reveals that younger investors are more inclined to take on higher risks, as can be gauged from their significantly higher share of net flows in the equity segment whereas the older investors exhibit a more cautious approach, with comparatively lower percentage of net flows in equity and higher allocation towards debt. Notably, in the higher age brackets, the investors are increasingly opting for hybrid schemes, which provides a balanced blend of growth and stability. As many as 70 NFOs in the equity category were launched in fiscal 2025, collectively mobilising Rs 85,244 crore, marking a significant increase from the 58 schemes launched in fiscal 2024, which garnered Rs 39,297 crore. Sectoral/ thematic funds emerged as the largest category within equity followed by Flexi-cap and Mid-cap. Together, the three categories accounted for 43 per cent share of the total equity AUM as at end-March 2025, AMFI said. Equity mutual funds saw a record inflow of Rs 4.17 lakh crore, the highest ever in a financial year. The net inflows during the year exceeded twice the net inflows in the previous year. 'This, combined with valuation gains, propelled the AUM of equity-oriented schemes by 25.4 per cent to Rs 29.45 lakh crore at end-March 2025. During the same period, Nifty TRI rose by 6.7 per cent,' it said. The mutual fund (MF) industry ended fiscal 2025 with AUM at a record Rs 65.74 lakh crore in March 2025 as against Rs 53.40 lakh crore in March 2024, marking an on-year rise of 23.11 per cent. The expansion in the AUM was primarily driven by robust net inflows during the fiscal year, reflecting sustained investor interest. Additionally, mark-to-market (MTM) gains provided a supplementary boost, underpinned by positive performance in both equity and debt markets. According to SBI Funds Management Ltd's Deputy Managing Director & Joint Chief Executive Officer, DP Singh, another important factor for higher contribution to the total MF AUM from the top five cities is that most of the country's wealth is also concentrated in these locations.
