USA: 5% tax on immigrants’ remittances

The phrase “uncertainties after uncertainty” best describes the situation we are in since several months ago. Remember Trump’s Liberation Day announcements? The weeks leading to that day made us hold our breath wondering how much tariff shall be slapped on our exports to the USA.

Though we were in a better position than most Asian countries, 17% is still huge. The good thing is that, uncertainty disappeared and exporters are now focusing on how to realign their targets, budgets and approaches.

Then came the mid-term election. While, supposedly, only candidates and their avid supporters get to worry, unavoidably, we were too. If the surveys do not show our favored candidates, of course, it’s worrisome. However, as the dusts settled, apprehensions as to whether surveys approximate actual results diminish and expectations mount. Expectations as to whether who the majority put in office are the right candidates for their respective jobs are just another uncertainty.

Of course, there were pleasant surprises. That most celebrities and entertainers, as well as, some tyrants lost is a positive development. At the very least, those lawmakers/celebrities in both legislative houses who were hanging by the thread in the last election will face uncertainties. Yes, those who will face the voters in the next election will have three agonizing years to contend their anxieties with. The same is true with those who are locally elected.

In any case, whether the euphoria of the winning candidates and their supporters still lingered on and the pains of those who lost remained, there is a development beyond our shores that are worth pondering on. This is about a priority bill pending in the USA’s House of Representatives that slaps 5% excise tax on all remittances.

Sponsored by the House Republicans, it “included in President Donald Trump’s big priority bill a 5% excise tax on remittance transfers that would cover more than 40 million people, including green card holders and nonimmigrant visa holders, such as people on H-1B, H-2A and H-2B visas.” Another uncertainty for us, Filipinos. Why? Our countrymen who are now residing in the USA collectively remits 40.6% of the total remittances worldwide.

To illustrate, let us consider the total remittances last year of US$38.3 billion (the highest to date). As our countrymen in the USA contributes 40.6%, in absolute amount, their remittances amount to US$15.55 billion. At the current exchange rate of P55.60 to a US dollar, that should translate to P864.6 million. Therefore, the proposed 5% excise tax of the US House of Representatives will result to a deduction from the current level of remittances to the amount of P43.2 million.

If we felt favored that our exporters to the USA were just slapped with a 17% tariff, this 5% excise tax is uniform to all. For a smaller economy like ours, the impact of such tax is so material. Worse, the recipients will certainly feel the pinch.

Not only that, the threat of deporting undocumented or illegal migrants hovers around.  Just fine, if they are. But how should that be defined? Will that include those who are still processing their green cards or permanent residency? To recall, as our country’s ambassador Jose Manuel Romuladez reported, there are between 320,000 and 350,000 (or even beyond such number) that can be potentially deported. If true, that will even have a bigger impact on our economy. More so with the recipients as it brings remittances down to zero.

Moreover, President Trump’s “America First” slogan is quite threatening as well. For the time being, his emphasis is on products, not services. With all certainty, he said that it is either they manufacture the products in the USA or face tariffs.

Finally, we have yet to hear though an official pronouncement about his plans on USA’s outsourced services. Reported to generate around US$38 billion in 2024, this one will really hit us. Again, lest we might forget, one of Trump’s favorite slogans is “America first.” To some extent, it could mean “insourcing” (as opposed to outsourcing) or bringing jobs back to the USA.

Indeed, as unpredictable as Trump, there will always be uncertainties after uncertainty.