How will planned US tax on remittances hit poor countries?

LONDON - President Donald Trump's 'Big, Beautiful Bill' will hit poor countries that rely on money sent home by loved ones working U.S. jobs, with analysts predicting a new 1% tax will shave hundreds of millions of dollars off annual remittances received.

The levy was signed into law on July 4 and is due to come into force next January.

The tax will raise billions for the United States while denying developing nations a crucial source of overseas income just as Western aid budgets also shrink.

Here's what you need to know about the proposed tax and its likely impact:

Why are remittances important?

For many families of migrants in poor countries, remittances are a lifeline for food, education and medicine.

On average, migrant workers send $200 to $300 home every one or two months, according to the United Nations.

Their reach is wider than cash transfers and they help many more poor households, research by think-tank ODI Global showed.

The U.S. Center for Global Development (CGD) research group said remittances are also increasingly vital to plug gaps left by the fall in foreign aid.

International aid fell in 2024 for the first time in six years, hitting $212.1 billion, and is set to drop further still.

Global remittances were more than four times higher than overseas aid in 2024, reaching nearly $923 billion, according to World Bank data, so this double drop in outside support is expected to hit the poor hardest.

Who will be hardest hit?

At least 48 million foreign-born U.S. residents are set to be affected by the remittances tax, according to CGD analysis.

The levy amounts to a double taxation on migrant earnings, according to the World Bank, given wages are taxed at source and will now be subject to a second levy on leaving the country.

Mexico, the world's No. 2 recipient of remittances after India, will be worst hit, losing about $1.5 billion a year, the research group added.

In April, Mexico central bank recorded the steepest drop in remittances in nearly 13 years.

Analysts said the slump likely resulted from a crackdown on migration since Trump took power.

Guatemala, India, the Philippines and El Salvador are also projected to lose hundreds of millions of dollars, CGD said.

Analysts say the tax will exacerbate poverty in nations that are heavily reliant on both remittances and foreign aid.

For example, remittances in Liberia are more than triple the size of the foreign aid it gets, CGD analysis showed.

It said that U.S. aid cuts are expected to remove about 2% of the country's gross national income (GNI), and a remittances tax would shave off a further 0.16%.

In Haiti, which is estimated to lose 0.31% of its GNI in taxed remittances, more than half the population is already short on food - even before the new cuts, the U.N. says.

(Reporting by Lin Taylor, editing by Lyndsay Griffiths and Anastasia Moloney.)