Trump’s ‘Big Beautiful’ remittance tax takes hold this week

Effective January 1, Jamaicans in the United States (US) sending money to relatives in their homeland will have to pay a one per cent excise tax on those remittances.

The one per cent tax is set out in the ‘Big Beautiful Bill’ passed by the US Congress and signed into law by President Donald Trump last July.

The new tax will be imposed on remittances sent as cash, money orders, cashier’s cheques and similar instruments. Funds sent by debit/credit cards or bank wire transfer will not attract the new tax.

According to the provisions of the bill, the new tax will be limited mainly to green card holders – permanent resident – and visa holders. Citizens sending money to relatives in Jamaica will not be subject to the new tax.

Jamaica’s Minister of Finance and the Public Service Fayval Williams told The Gleaner that while the Government is still studying what effect the new tax could have, she did not believe it would result in any significant fallout.

“We believe that Jamaicans in the diaspora sending money to their relatives back home will absorb the one per cent tax, so that their relatives can get the full amount,” Williams said.

The minister noted that remittances to Jamaica remain strong and pointed out that for the period January to June this year, the sums were up 3.6 per cent over the same period for 2024.

“If the sender in the United States absorbs the fee and does not reduce the amount that is sent to the family member in Jamaica, then there may not be an impact,” Williams said.

“But if the sender deducts the fee and sends the remainder, thus reducing the amount that family member gets in Jamaica, there could be an impact. But it is too early to say.”

The minister stressed that remittances sent to family members are used for school fees and other necessities and, if the amounts received by family members is reduced, this could impact homes and, in turn, the Jamaican economy.

Disposable income

While Williams has yet to determine the expected impact of the remittance tax that comes into effect this week, a government analysis conducted earlier in the year states: “ A one per cent tax effectively reduces the disposable income of remittance-receiving households – akin to a new import duty on foreign aid from the diaspora. Over time, this could modestly dampen consumer spending and poverty alleviation efforts. Additionally, if migrants reduce the amount they send to offset the fee, local businesses in Jamaica that depend on remittance-fuelled spending may see lower sales”.

If remittances amount to US$2 billion for the year, the one per cent tax would result in payment of US$20 million to the US Treasury.

Jamaica currently receives roughly US$3.3 billion to US$3.5 billion in remittances annually, the majority of which comes from Jamaicans in the US. Remittances currently account for 17 per cent to 20 per cent of Jamaica’s GDP.

In the original version of the bill passed by the US House of Representatives, the tax on remittances was set at five per cent. However, the US Senate reduced it to one per cent.

“ Despite the tax rate being pared down to one per cent, it ‘could be a setback for financial inclusion’ in the region, by nudging transactions outside formal banking channels. This provision is a focal point of concern, as it effectively monetises diaspora earnings and could undermine the vital flow of remittances that sustain many families and stabilise local economies,” states the analysis document seen by The Gleaner earlier this year.

By charging senders a one per cent fee, the bill raises the cost of remitting. This could lead some people to send less money or send money less frequently, thus negatively affecting recipients’ spending power in Jamaica.

For Jamaica, even a small percentage loss in remittance income can have outsized effects. Families use remittances for daily living expenses, education, healthcare, and investing in small enterprises.

Because the tax applies only to cash-based transfers and not to bank transfers or digital payments, many Caribbean migrants may try to avoid the fee by using electronic methods. Those with bank accounts might switch to online remittance services or direct bank wires, which are exempt.

However, unbanked or older migrants who rely on cash services will have no choice but to pay the one per cent fee. There is also concern that a tax could drive some senders to informal or illicit channels (couriers, hawala-type networks) to evade the fee, undermining the formal remittance industry and financial transparency.

Anti-avoidance measures

The legislation also includes anti-avoidance measures.

It references applying anti-conduit financing rules to remittances – and may entail increased oversight of money transmitters and mandatory use of regulated channels.

While this aims to prevent tax evasion and money laundering, it could also increase compliance costs for remittance companies and potentially slow down transfers. Caribbean-focused money transfer operators might face new reporting requirements, and will need to adjust their systems to collect the tax and remit it to the US Treasury, the analysis noted.

Jamaican leaders in the daspora have come out against the imposition of the new fee.

“The Big Ugly Bill steals food out of the hands of starving children, steals medicine from the cabinets of cancer patients, and equips ICE with more funding and more weapons of war than the United States Marine Corps,” said US Congresswoman Yvette Clarke, whose parents are Jamaicans.

Dr Karren Dunkley, diaspora leader and international educator, said the one per cent remittance tax was a direct blow to Jamaica’s recovery and the families who depend on it.

“This is not a theoretical policy. It will affect real families – in real time – at a moment when Jamaicans are still recovering from the devastation of Hurricane Melissa,” Dunkley said.

“During my two hurricane relief missions to Jamaica, I personally witnessed long lines wrapped around corners – Jamaicans standing in the heat for hours, waiting to collect the remittances sent by relatives overseas. Those funds were not luxuries. They were food, money, medication, housing repairs, school supplies, and survival support in the aftermath of a national disaster.”

Dunkley said remittances continue to function as critical recovery assistance and so, to impose a federal tax on this lifeline now is to risk slowing rebuilding efforts, increasing hardship, and weakening financial support to the very communities most affected.

“Analysts have already warned that even a one per cent tax could result in a measurable decline in remittance flows to developing and remittance-dependent nations such as Jamaica. Given the significant role remittances play in household stability, small business resilience, and social safety nets, any decline will be felt most deeply by the poor, the elderly, and working-class families,” she said.

“The diaspora has never turned its back on Jamaica. We send remittances out of love, family commitment, and cultural responsibility. To tax that duty – particularly following a national disaster – is to tax compassion, resilience, and human survival.

“I urge US policymakers and global partners to reconsider this measure and engage the diaspora as constructive collaborators in safeguarding economic stability and recovery efforts.

“A remittance is not just a financial transfer – it is a lifeline. And now more than ever, in the wake of Hurricane Melissa, Jamaica cannot afford to have that lifeline weakened.”

Former Jamaica Global Council member Dr Allan Cunningham said the impending tax was devastating news, especially for poor families who depend on remittances.

“Poorer families are going to feel more economic hardships and children might have it difficult attending schools. No doubt, this will have a crippling effect on the country’s economic health,” he told The Gleaner.

editorial@gleanerjm.com