With Donald Trump’s return to office, discussions on a potential remittance tax are gaining renewed attention. Initially proposed to fund a border wall, this policy could have lasting impacts on financial services, particularly cross-border payments. Historically, Trump’s earlier attempts at implementing a remittance tax faced significant resistance from within his own party. However, with a new team in place, supportive of bold policy shifts, the landscape has changed, making it likely that taxation on cross-border remittances could be implemented.
GlobalData’s Remittance Analytics
In Trump’s original proposal, Mexico was asked to make a one-time payment of $5–10bn or, alternatively, face a 2% tax on all person-to-person wire transfers to Mexico, along with other countries in Latin America and the Caribbean. With fewer obstacles now, this tax appears increasingly feasible. According to GlobalData’s Remittance Analytics, the US received $7.2bn in inward remittances in 2023, projected to reach $7.5bn by 2028. Mexico is the largest contributor, with $1.9bn or 27% of all inbound transfers, followed by Puerto Rico at $385m. A tax could significantly disrupt these flows, raise consumer costs, and alter the dynamics of cross-border transactions.
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The potential effect on outward remittances is even more significant. The US sent $228bn abroad in 2023, with Mexico receiving $65bn—29% of total outbound remittances, as per GlobalData’s Remittance Analytics. Other Latin American and Caribbean countries, such as Guatemala ($18.2bn), the Dominican Republic ($7.8bn), El Salvador ($7.3bn), and Honduras ($7.2bn), also rely heavily on these funds. This tax could discourage the use of formal remittance channels, pushing more transfers into informal networks and challenging the business models of regulated providers.
Remittance tax and its potential impact on remittance volumes
A remittance tax would require financial institutions and remittance providers to undertake new compliance tasks, such as tracking, reporting, and potentially collecting taxes on cross-border transfers. This could increase operational costs, necessitating significant investments in compliance technology, which would likely impact profitability.
Rising costs could reduce remittance volumes, especially in Latin America and the Caribbean, where many depend on these funds. A tax on remittances to Mexico alone would impact $65bn annually. Furthermore, this tax would disproportionately impact low-income households reliant on these funds, particularly across Latin America. With rising fees, families in these regions would face increased financial burdens, potentially losing critical sources of income. Faced with higher fees, some consumers may turn to alternative digital channels, such as cryptocurrency or peer-to-peer networks, which can bypass traditional fees. While these options offer flexibility, they also come with security risks, especially for vulnerable consumers, while also challenging the business of regulated providers.
If remittance tax is implemented, financial institutions involved in cross-border payments may need to rethink strategies to stay competitive. Developing cost-effective transfer products or collaborating with fintech firms could help retain customers and manage new compliance requirements. As remittance providers adapt to new regulations, demand for advanced compliance technology will be expected to surge, with banks increasingly relying on fintech partnerships to streamline compliance processes and manage operational burdens.
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By GlobalDataThe proposed remittance tax could redefine cross-border payments, creating challenges and opportunities in financial services. With the Trump administration likely to drive this policy forward, financial institutions, payment providers, and consumers must prepare for an environment where remittance taxation may fundamentally reshape the sector.
Joanne Kumire is Lead Analyst for Banking and Payments, GlobalData
