Policy Alert: House Republicans Propose Excise Tax on Remittances

Action: Provision on “Excise Tax on Remittance Transfers”

What it does: As part of the budget reconciliation process to advance the President’s legislative agenda, House Republicans have proposed a 5% excise tax on remittance transfers, paid by senders of remittances. Remittance transfer providers are required to collect the tax and transfer tax payments quarterly to the Treasury and have secondary liability for any tax not paid at the time the remittance is made. The provision includes an exception for senders verified as a US citizen or national by a “qualified remittance transfer provider” that enters into a written agreement with Treasury. Different types of financial services providers, including banks, may qualify. The provision also provides a refundable tax credit for any excise taxes required to be paid by taxpayers with valid Social Security numbers and contains an anti-conduit rule.

Key Insights

• The Joint Committee on Taxation estimates that this provision will raise $22.2 billion in revenue between 2025 and 2034 (roughly between $1 billion and $3 billion per fiscal year).
• According to the World Bank, the US has consistently been the top country sending remittances globally, with $79 billion in remittances sent from the US to foreign countries in 2022.
• In 2022, the top countries receiving remittances (both from the US and other countries) were India ($111 billion), Mexico ($61 billion), China ($51 billion), and the Philippines ($38 billion).
• Remittances make up a substantial share (more than 20%) of the GDP of several developing countries, including Honduras, El Salvador, and Nicaragua that have been a significant source of migrants to the US in recent years.
• Mexico’s Ambassador to the US wrote to the Committee on Ways and Means urging reconsideration, stating the proposed excise tax on remittances amounts to unwarranted additional taxation on wages and could “increase risks related to financial security, tax evasion and money laundering.”
• Although the provision refers to US citizens and nationals (rather than “persons”), it presumably does not apply to US companies sending funds to other companies or individuals abroad using qualified remittance transfer providers. It is also unclear whether the tax would be collected on the amount actually transferred abroad or also on fees collected by the transfer provider.
• Advocates for migrants and remittance experts contend that the tax could actually increase migration to the US; remittances to family members and poor communities in developing countries reduce the pressure for people in those communities to leave their home countries. Supporters of the policy believe the tax serves as a disincentive for potential migrants to attempt to travel to the US and send money back to their home country.