Latest news with #remittanceTax
Fox News
a day ago
- Business
- Fox News
Trump's remittance tax aims to slow illegal immigration by targeting the money flow
The Senate's version of the "one big, beautiful bill" includes a tiny, 1% tax on international cash transfers — called a remittance tax — which, according to experts, will have a major impact on immigrants working in the U.S. A remittance is a money transfer to another country outside the U.S., which is a common practice among immigrant workers who send part of their wages back to family in their native countries. Tens of billions of dollars in remittances are sent to other countries from the U.S. every year. Earlier versions of the bill included higher tax rates and specifically targeted illegal immigrants sending money outside the U.S. The current version of the "big, beautiful bill," however, imposes a 1% fee only on cash transfers, not electronic transfers, sent to other countries. U.S. citizens who want to send cash to other countries will also be subject to the 1% tax. The tax is expected to generate $10 billion in extra revenue for the federal government, according to an estimate done by Politico. Besides generating extra revenue, Lora Ries, director of the Border Security and Immigration Center at The Heritage Foundation, told Fox News Digital that the remittance tax has the potential to discourage illegal immigration into the U.S. by making it harder to send money back home. "Illegal aliens generally want five things when coming to the U.S.: to enter, to remain here, work, send money home (remittances), and bring family and/or have children here," she explained. "Prevent those five things, and you prevent illegal immigration and encourage self-deportation." The administration has been pushing hard for illegal immigrants to self-deport, incentivizing them by offering to front the cost of commercial flights and providing a $1,000 stipend to those who opt to self-deport. Ries said the remittance tax could be another effective strategy besides ICE raids that could help to crack down on illegal immigration into the country and reduce the number of illegal immigrants in the U.S. Ries said, however, that the 1% needs to be much higher to be effective. "A 1% tax only on cash transfers does very little. The tax should be much higher and cover all types of money transfers," she said. "Until now, the U.S. government has not touched the annual billions of dollars going out of the country, not benefiting the U.S. economy," she went on. "Remittances should be taxed to discourage unauthorized employment and its earnings." Meanwhile, Ariel Ruiz Soto, a senior policy analyst at the Migration Policy Institute, told Fox News Digital that though he believes the remittance tax will have a significant impact, it may not be in the way the Trump administration hopes. He argued that discouraging remittances to countries like El Salvador, Guatemala, and Honduras — where such payments account for more than 20% of the GDP — could actually drive more migration from those nations. "If you're Honduras, if you're El Salvador and Guatemala, even a 1% tax, if it decreases the remittances, could actually be a significant toll in the development of those countries," he said. "If the remains were actually to decrease significantly, that could potentially backfire on President Trump's agenda to reduce irregular migration because he could actually make circumstances, economic circumstances in these countries more difficult and spur new irregular immigration in the future." The House of Representatives is currently considering the Senate's version of the "big, beautiful bill."
RNZ News
3 days ago
- Business
- RNZ News
What does the US remittance tax mean for the Pacific?
A view of the US Capitol in Washington on 30 June 2025. US senators began voting Monday on Donald Trump's flagship spending bill, as the deeply divisive package -- expected to slash social programs for the poor and add an eye-watering $3 trillion to the national debt -- entered its frenetic home stretch. Photo: AFP / Jim Watson The United States is set to implement a tax on remittances paid by migrants to their communities overseas. The tax is a component of the " One Big Beautiful Bill ", a cornerstone fiscal measure under President Donald Trump. When the spending bill passed through the House of Representatives, the tax was set at 5 percent. The US Senate reduced it down to 3.5 percent, and now again to 1 percent. The bill has undergone numerous amendments in the Senate before it goes back to the House for final negotiations and then to the White House. However, even if the final tax level falls on the lower end, Pacific development experts say that both direct and indirect impacts pose a significant threat to the region. Deep within the pages of congressional reports on the "One Big Beautiful Bill" lies a section titled "Removing Taxpayer Benefits for Illegal Immigrants". The tax takes aim at outward flows of income generated by illegal immigrants within the US economy, one of several measures designed to disadvantage illegal immigrants financially. Remittance transfer providers, such as US banks, credit unions, or licensed brokers and dealers, would collect the tax at the point of transfer before the remittance is sent abroad, increasing the cost of sending remittances. The tax applies to all US citizens and nationals sending money overseas, though it had originally been aimed only at illegal immigrants before a Senate redraft on 30 June. With the US responsible for the largest global share of remittances, particularly to Latin America and the Caribbean, critics argue it could cause serious damage in the developing world. In May, Mexican President Claudia Sheinbaum denounced the tax as "a measure that is unacceptable". It is also proven controversial in right-leaning circles, particularly among libertarians, prompting draft after redraft of the policy. The American Enterprise Institute, a conservative-leaning think tank, called the tax "poorly designed". "Although the Senate bill's narrowing of the tax would greatly diminish these problems, it would not eliminate them. That outcome can be attained by rejecting the remittances tax in its entirety." The US Migration Policy Institute estimates that, as of 2023 there are 166,389 immigrants currently in the US who were born in Oceania (other than Australia and New Zealand). The Pacific Network on Globalisation (PANG), an organisation of civil society groups throughout the region, said the tax will have "profound implications" on Pacific livelihoods. PANG deputy coordinator Adam Wolfenden told RNZ Pacific that, while relatively less remittance cash finds its way into the Pacific, these are nations who rely on it. "For a country like Samoa, which gets 20 percent of its remittance money from the US, we'll see that cut. For a country like Tonga, for who the US is its biggest source of remittances at just over 35 percent, this will see a cut." "Studies have shown that any increase in the cost of sending money home has a larger impact." According to the World Bank, sending remittances currently costs an average of 6.62 percent of the amount sent, thanks to things like provider fees. Wolfenden pointed to a study by the Center for European, Governance and Economic Development Research, which found that demonstrates that one percentage point increase in remittance costs would correlate with a 1.6 percent decline in the amount that reaches it's final destination. A potential 3.5 percent tax would reduce remittance flows by 5.6 percent, PANG said. "The fear is that, for those who receive remittances in those domestic economies, particularly that rely on remittances to fund a lot of consumption, the tax will ultimately lead to some kind of decrease in economic growth. Amid other US actions in the Pacific, such as massive cuts to aid, tariffs and increased militarisation, Wolfenden believes the US simply is not considering the Pacific in the decision making. "I think they are promoting their interests above all else. And I think that is a short-sighted view towards what a relationship with the Pacific means." The Australian National University's Development Policy Centre deputy director Dr Ryan Edwards called the tax "terrible". "Remittances can get sent in many ways. There's the cash ones which will be targeted through formal channels, and informal channels, where people often just carry it back in their suitcases and declare it or find other ways," he said. "This will push everything to the informal channel market, which many countries have tried for a long time to move people away from for security reasons." Edwards told RNZ Pacific that he is concerned about the precedent the policy will set, and what kind of signal it would send to governments with significant aid contributions. "We have seen the current US administration testing the waters with international trade, aid, and other things. [These things] tend to benefit both sides in ways that we often do not pick up at a first glance. "It is a slippery slope in terms of setting an example, and the US has historically had a role as a global example not so much anymore."
RNZ News
3 days ago
- Business
- RNZ News
What does the US remittance tax means for the Pacific?
A view of the US Capitol in Washington on 30 June 2025. US senators began voting Monday on Donald Trump's flagship spending bill, as the deeply divisive package -- expected to slash social programs for the poor and add an eye-watering $3 trillion to the national debt -- entered its frenetic home stretch. Photo: AFP / Jim Watson The United States is set to implement a tax on remittances paid by migrants to their communities overseas. The tax is a component of the " One Big Beautiful Bill ", a cornerstone fiscal measure under President Donald Trump. When the spending bill passed through the House of Representatives, the tax was set at 5 percent. The US Senate reduced it down to 3.5 percent, and now again to 1 percent. The bill has undergone numerous amendments in the Senate before it goes back to the House for final negotiations and then to the White House. However, even if the final tax level falls on the lower end, Pacific development experts say that both direct and indirect impacts pose a significant threat to the region. Deep within the pages of congressional reports on the "One Big Beautiful Bill" lies a section titled "Removing Taxpayer Benefits for Illegal Immigrants". The tax takes aim at outward flows of income generated by illegal immigrants within the US economy, one of several measures designed to disadvantage illegal immigrants financially. Remittance transfer providers, such as US banks, credit unions, or licensed brokers and dealers, would collect the tax at the point of transfer before the remittance is sent abroad, increasing the cost of sending remittances. The tax applies to all US citizens and nationals sending money overseas, though it had originally been aimed only at illegal immigrants before a Senate redraft on 30 June. With the US responsible for the largest global share of remittances, particularly to Latin America and the Caribbean, critics argue it could cause serious damage in the developing world. In May, Mexican President Claudia Sheinbaum denounced the tax as "a measure that is unacceptable". It is also proven controversial in right-leaning circles, particularly among libertarians, prompting draft after redraft of the policy. The American Enterprise Institute, a conservative-leaning think tank, called the tax "poorly designed". "Although the Senate bill's narrowing of the tax would greatly diminish these problems, it would not eliminate them. That outcome can be attained by rejecting the remittances tax in its entirety." The US Migration Policy Institute estimates that, as of 2023 there are 166,389 immigrants currently in the US who were born in Oceania (other than Australia and New Zealand). The Pacific Network on Globalisation (PANG), an organisation of civil society groups throughout the region, said the tax will have "profound implications" on Pacific livelihoods. PANG deputy coordinator Adam Wolfenden told RNZ Pacific that, while relatively less remittance cash finds its way into the Pacific, these are nations who rely on it. "For a country like Samoa, which gets 20 percent of its remittance money from the US, we'll see that cut. For a country like Tonga, for who the US is its biggest source of remittances at just over 35 percent, this will see a cut." "Studies have shown that any increase in the cost of sending money home has a larger impact." According to the World Bank, sending remittances currently costs an average of 6.62 percent of the amount sent, thanks to things like provider fees. Wolfenden pointed to a study by the Center for European, Governance and Economic Development Research, which found that demonstrates that one percentage point increase in remittance costs would correlate with a 1.6 percent decline in the amount that reaches it's final destination. A potential 3.5 percent tax would reduce remittance flows by 5.6 percent, PANG said. "The fear is that, for those who receive remittances in those domestic economies, particularly that rely on remittances to fund a lot of consumption, the tax will ultimately lead to some kind of decrease in economic growth. Amid other US actions in the Pacific, such as massive cuts to aid, tariffs and increased militarisation, Wolfenden believes the US simply is not considering the Pacific in the decision making. "I think they are promoting their interests above all else. And I think that is a short-sighted view towards what a relationship with the Pacific means." The Australian National University's Development Policy Centre deputy director Dr Ryan Edwards called the tax "terrible". "Remittances can get sent in many ways. There's the cash ones which will be targeted through formal channels, and informal channels, where people often just carry it back in their suitcases and declare it or find other ways," he said. "This will push everything to the informal channel market, which many countries have tried for a long time to move people away from for security reasons." Edwards told RNZ Pacific that he is concerned about the precedent the policy will set, and what kind of signal it would send to governments with significant aid contributions. "We have seen the current US administration testing the waters with international trade, aid, and other things. [These things] tend to benefit both sides in ways that we often do not pick up at a first glance. "It is a slippery slope in terms of setting an example, and the US has historically had a role as a global example not so much anymore."
