When in 2016 Donald Trump announced, during his cam- paign stump speech, that he would build a wall and get Mexico to pay for it – many wondered how this could be achieved. It was clear even then he intended to get assent from Mexico by a com- bination of taxing remittances and bullying tariffs.

In his second coming, the once-speculative campaign proposals have been trans- formed first into a ruthless tariff regime and secondly, the federal law, OBBB, or the One Big Beautiful Bill Act (H.R.1), where a 1% excise tax on cer- tain types of remittance trans- fers has been imposed.

The House version of the bill originally proposed a 5%, then 3.5% excise tax on all outbound remittance trans- fers, with language targeting non-citizens specifically. The measure was expected to raise billions in revenue and pres- surise foreign governments, while aligning with the ad- ministration’s broader anti- migration strategy.

However, the proposal im- mediately met significant op- position, both from within the US and internationally, espe- cially from Mexico and India.

Critics pointed out that such a broad tax would not only pun- ish undocumented migrants but also lawful immigrants, US citizens with foreign fam- ily ties, and ultimately foreign economies heavily reliant on remittances.

It would represent a triple taxation (income tax, remit- tance excise tax, and money transfer fee) on one set of poor people, sending money to an- other set of poor people, un- dermining all the sustainable development rhetoric on re- ducing global poverty, includ- ing especially, the SDG target of lowering the costs of money transfers to below 3% by 2030.

Remittance inflows often surpass foreign direct invest- ment and development aid. India received over $100bn in remittances in 2024, Mexico $64bn, and Nigeria, $21bn, with a significant portion in all three cases coming from the US.

Intense lobbying and legal scrutiny forced key revisions in the Senate, with the final version passed into law on 4 July 2025, introducing a re- duced 1% excise tax, applicable only to cash-based remittance methods such as money orders and cashier’s checks.

Transfers funded via bank accounts, debit cards, or credit cards were explicitly exempted. This narrowing significantly mitigated the law’s reach while preserving its symbolic and revenue-generating functions.

Setting a bad example?

Having crossed the Rubicon – it is predicted that this fig- ure will now only broaden to include previously excluded transfers and creep up again (2%, 3%, 4%?), depending on domestic political calculus around migration. It is also likely to be copied by other remittance-sending economies in the West and perhaps, even the Gulf States.

Currently, the 1% tax is ex- pected to generate up to $10bn in revenue for the US over 10 years, but one can see the fu- ture temptation to view this as an easy source of future ‘tax’ revenue, without broad do- mestic political consequences.

Given the importance of remittances to African econ-omies (for instance, in 2019, Nigeria’s $23.8bn income from remittances was larger than the $19bn federal budget), one has been surprised by the lack of organised public pushback or broad debate to a remittance tax across multiple sectors, including from governments, advocacy groups representing immigrant communities, and financial institutions.

In terms of pushback and lines of attack, it is possible to learn from and build on the justifications provided by US lawmakers to exempt remit- tance transfers funded through bank accounts, debit cards, and credit cards. These include:

- The Traceability and Compliance issue: Regulated financial institutions are al- ready subject to anti-money laundering (AML) and know- your-customer (KYC) laws, reducing the rationale for taxation as a deterrent against illicit finance.

- Minimising Financial Sector Disruption: Taxing mainstream digital channels would create significant com- pliance burdens and possibly violate consumer protection laws.

- Protecting Formal Remit- tance Channels: Taxing formal transfers would drive senders toward unregulated or under- ground channels, increasing risks of fraud and reducing financial inclusion.

African countries can go further than this and become more proactive. In this age of reciprocal tariff wars, one op- tion is also to consider a com- mon, quid pro quo additional reciprocal tax on the profits of US or other countries’ multi- national corporations, in pro- portion to the remittance ex- cise taxes they wish to charge.

The current tax is a serious threat that will only grow in intensity. The threat should spur African countries into a renewed focus on reducing dependence on remittances, enhancing domestic financial systems, and engaging in dip- lomatic advocacy to prevent future expansions of the tax. n

It is predicted that the US’s 1% excise tax on remittances will only broaden and rise.

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