Migrant families fear Trump's remittance tax

DW (English)

Nearly $160 billion is sent annually to Latin America from the US, as millions of migrants send the money to support families in their home countries. But could that change as a result of a new tax on such transfers?

Transcript

00:01Estela Vallejo fears that soon her money won't be able to cover her daily costs.

00:07The United States wants to put a 3.5% tax on remittances.

00:12That means that she gets to keep less than what her son sends from the United States.

00:18And that is why Vallejo has started reducing her expenses as much as she can.

00:25I'm worried that he will also have less money for himself when he sends me money.

00:38And I'm also worried that I have to make some big cuts to my spending.

00:43Remittances to Mexico from the US have been rising.

00:47The total amount reached $64 billion last year.

00:51That accounts for 3.5% of Mexico's GDP.

00:55And in some regions and communities, remittances can account for up to a quarter of the economy.

01:00The US tax on remittances is considered unjust and a violation of international law,

01:05according to studies by banks like Spain's BBVA.

01:09For economist James Salazar, the primary aim of the new tax is to dissuade immigrants from going to the US.

01:16The tax will generate around $1.5 billion for the US government.

01:22That's a significant amount for Mexico.

01:24But it would only be 0.005% of the US GDP.

01:29That's practically nothing.

01:30That's why this issue reeks of politics.

01:33The new measure will also require money transfers to be tracked.

01:40Estela Vallejo is concerned that this will raise the risk of deportation for her son.

01:45That means many of the 4 million undocumented Mexicans living in the US will turn to other forms of money transfer,

01:52like electronic wallets, cryptocurrencies or even cash.

01:56And that will promote the use of illegal channels which might even be controlled by organized crime.

02:02We may have to look for alternatives which don't lead back to him.

02:10But I'm worried about that.

02:17Evidence shows that remittances are sometimes used to launder money.

02:22Around 7.6% of transfers came from organized crime.

02:27That's according to a report by Senos Vitales.

02:33The US has managed to keep tubs on traditional money laundering options.

02:37But criminals are increasingly turning to cryptocurrency.

02:40This measure isn't sufficient to prevent money from being laundered in Mexico.

02:50There are many financial channels.

02:55Since last June, we have observed that virtual assets have increased significantly since 2023.

03:08The proposal to increase the tax on remittances could worsen the lives of millions of Mexicans and their families.

03:15I'll see you next time.

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