By: Staff Writer
May 27, 2025
The US Congress is proposing a 5 percent tax on remittances and money transfers of non-US citizens.
A report by The Dialouge Leadership for the Americas, said that this provision may contradict and adversely disrupt regulations regarding money transfers, which have been effective in preventing financial crimes and ensuring legitimate transactions, such as sending money to family members. Since 9/11, the Patriot Act and subsequent regulations and rules have been an effective piece of legislation for regulating, monitoring, and preventing financially suspicious activities.
The United States is one of the top sources of remittances in the world, with $79.15 billion in remittances sent to family and friends outside the country in 2022 alone
The report also said: “Three pieces of the legislative amendment introducing the tax raise several issues: first, who can send money and be tax-exempt; second, how remittance transfer providers (RTPs) are required to confirm citizenship and tax status; and third, the cases in which an RTP is liable for that tax.
“In the first case, the tax affects practically anyone who is not a U.S. citizen and carries an unreasonable burden on those who are. With regard to the latter, the text offers a tax exemption after verifying ‘the status of senders as citizens or nationals of the United States.’
“That means, apart from close to 25 million naturalized citizens, any other United States citizen (of the close to three hundred million adult Americans) who wants to send a remittance transfer abroad would have to show proof of citizenship. Citizenship status by naturalization varies across nationalities and may be 53 percent of all foreign-born.
The report continued: “Overall, the request poses a serious inconvenience and privacy problem to U.S. citizens in providing that information. U.S. citizens would be compelled to carry their proof of citizenship or deal with the hurdle of requesting a tax credit—while still needing to show proof of citizenship at some point. Many American citizens, naturalized or native-born, donate funds to philanthropic and religious organizations abroad, and many individuals use remittance transfer providers to send charitable donations or to transfer money to friends or even relatives abroad (for example, a parent sending money to their child studying abroad, a former Peace Corps Volunteer sending to a friend living outside of the U.S.).
“According to the Global Philanthropy Tracker, the United States makes US$49 billion in donations abroad, which includes individuals sending money to small groups. Twenty-six percent of Americans make charitable donations, and 6 percent of the total is sent abroad.”