As the Financial Times (FT) reported Sunday (May 25), that’s because the tax bill passed by the U.S. House of Representatives last week includes a 3.5% tax on remittance transfers by anyone who is not an American citizen or national.
The U.S., the report added, is the largest originator of remittances in the world, with more than $656 billion sent overseas in 2023, per figures from the World Bank.
Experts told the FT there were several ways the tax could be circumvented. Migrants could ask a friend or family member who is a citizen to send the money, use cryptocurrency, or turn to the black market, such as “mules” who physically transport cash.
The report added that the impact of the tax might be difficult to determine. Many experts say several factors could affect remittances, including the economic slump in the U.S., people front-loading remittances as Trump took office, and a significant increase in mass deportations.
“There may be an impact, but I’m not sure if it’ll be noted at the macro level,” said Ricardo Barrientos, executive director of the Central American Institute for Fiscal Studies.
New illegal border crossings into the U.S. have plunged to their lowest in decades, but so far, Trump has deported people at a lower rate than President Joe Biden had during his tenure. The largest question hanging over the migrant money movement issue is whether Trump can carry out the mass deportations he promised.
“So long as a migrant stays in the U.S., that person will find the way to send the money because it’s their lifeline,” Barrientos said.
Money movement provider Western Union said last month that a drop in migration across Latin America led to slower growth in the remittances business for the company’s first quarter.
“Migration across Latin America has been slowing for several quarters, and the first quarter was a continuation of those trends,” Western Union CEO Devin McGranahan said during the company’s earnings call. “Slower migration levels in the region have led to lower intra-LACA [Latin America and the Caribbean] remittance volumes.”
The trend underscored the importance of the company’s “globally diversified business,” McGranahan added. The Americas make up half the company’s consumer money transfer revenue, 39% from North America, 11% from the LACA countries.
