The Republicans of the United States House of Representatives presented a fiscal plan with a list of priorities to obtain new income, which includes a special 5% tax to sending remittances to people abroad.
According to international agencies, legislators sought to advance on Tuesday, May 13, the bill with which the president of the United States, Donald Trump, wants to fulfill their promises to extend the tax exemptions of their first mandate with new sales, which lead to reduction in some programs and creation or increase of taxes in others.
In the case of family remittances, the proposal includes establishing a 5%tax, which would fall on the issuer and affect migrants who send money to their families.
According to the media the day, the project details that the undocumented must pay a 5 percent tax on the amount they send through remittances and certified shipping companies must retain that quota and then deliver it to the Treasury Department, unless it is proven that the resources are sent by verified American citizens.
This seeks to prevent the benefits of taxpayers from reaching undocumented immigrants; For this, a Social Security number will be required to people who request tax credits and deductions, the eligibility of immigrants without documents will be ended to obtain fiscal credits of the premium of the Obamacare and Medicare programs, and apply new rates to the immigrant remittances payments without papers outside the United States, ”details the exposition of motives.
Important weight for Guatemala
In the case of Guatemala, in 2024 the country closed with family remittance income for US $ 21,512 million, a growth of 8.6% compared to 2023.
By 2025, in April, the projection of closing of the year was adjusted upwards, providing US $ 23,466 million, a 9% growth compared to the previous year. This, in part, has been considered as a result of the fear that has aroused the immigration policy implemented by the United States.
Each year, the figure represents 19% of the Gross Domestic Product (GDP), according to data from the Bank of Guatemala (Banguat).
Will you have an impact? These are the scenarios
If a measure like in the United States is approved, in terms of its possible impact on migrants and Guatemala’s economy, taking into account what the amount of remittances represents, the president of the Banguat, Álvaro González Ricci, and economic analysts explain various points.
• If approved, migrants would assume the cost
González Ricci, president of Banguat, says that, because it is a proposal, a strong response cannot be had, since it should be remembered that a federal law in the United States, to apply, must also have state support. And in this case, ”he added – there are some states in which there could be opposition to a measure like this, in particular in those called migration sanctuaries.
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If approved, it is most likely that migrants absorb this additional cost and not translate into a decrease in their shipments to Guatemala, considers the president of the Central Bank. And, if that scenario gave, there would not have to be a decrease in the amount of family remittances sent to the country, he added.
The official explained that the importance of remittances in the Guatemalan economy is increasing, not only because of the weight they have in GDP, of about 19%, but because the flow in millions of dollars is significant and tends to promote, particularly, the consumption of families.
According to the Center for Latin American Monetary Studies (CEMLA), for about 30% of families that receive remittances, these constitute the only income they have, so the effect is not only macroeconomic, but also affects the standard of living at the microeconomic level, that is, familiar, González explained.
• Download remittance income
The cost of sending remittances ranges between 5% and 10%, so, if the new tax was approved, this cost would increase by 5%, said Guillermo Díaz, an economic researcher at Rafael Landívar University (URL). At its discretion, in that percentage the amount of the roughness that the family receives, since the migrant person could continue to send the same current amount, from which the tax would be discounted.
The average spike is almost US $ 800, so 5% would be US $ 40, which represent around Q300 less for the receiver, he said.
Meanwhile, in macroeconomic terms it would be equivalent to a 5% drop in the total remittances that the country receives, which would affect consumption. To avoid this effect, migrants would have to send more, which implies working more or consuming less in the United States, he mentioned as an example.
In this case, the country could register a fall of more than US $ 1 billion in remittances, Diaz estimated taking that scenario into account.
“If completed, the external shock would be double: with the fall of exports and remittances, which implies lower growth rate of the economy this year,” Diaz warned.
• Decrease shipping for investment and savings
Pedro Pablo Solares, a specialist in migratory issues, explained that the International Drums is a main reason behind the economic migration model.
He added that a 5%tax, currently, is still below the annual growth rate of remittances to Guatemala, but considers that “adds one more nail in the current strategy of demoralization against irregular migration.”
Solar lists possible effects if that tax achieves legal validity:
- The sending of remittances dedicated to investment and savings could decrease, more than those destined for consumption.
- He does not observe that a 5% tax on the international spiker manages to increase the number of people who want to accept the invitation of self -exports made by the United States government, but considers that it can contribute to less Guatemalans are attracted to emigrate at this juncture.
- Nor does he believe that, with the possible tax, the population that sends remittances intends to replace the commercial channels with other unregulated, given the ease of bank remittance and the danger of clandestine methods.
In addition, 5% of tax would impact the percentage variation of remittances, which this year is anticipated that it will reach double digit, Solares said.
• Consumption would lower and the demand for public services would increase
Jorge Benavides, an analyst at the Foundation for the Development of Guatemala (Fundesa), explained that when observing it from the perspective of the workers, a reduction in the amount sent to their relatives in Guatemala could be expected, but it could also drag with it with a position to the cost of living, a decrease in the income available for savings and acquisition of assets, and possibly leads to the decision to increase the number of hours worked, implying a longer stay than expected.
Regarding the general amount that is received in the country, the analyst comments that with any tax whose tax base is income, the immediate effect will be a reduction in the amount of remittances received by Guatemalans. But possible derived effects such as:
- Decrease in national consumption.
- Failure to pay acquired debts.
- Reduction in available working capital.
- An increase in the exchange rate for less income of dollars to the country.
Meanwhile, regarding the impact on the economy, Benavides considers that the reduction in consumption would directly impact the trade sector, which is the sector that generates the most employment in Guatemala.
Another effect could be on products prices; It could even give a slight deflation for less availability of resources in local economies, added the economic analyst. Nor should the pressure that would be generated in the demand for the provision of public services, both in education and health, be ruled out, since 12.3% of the remittances received are used to cover expenses in these sectors, he said.
• It would affect the damper of the family and national economy
A tax as the aforementioned could affect the current rate of growth of remittances. Although in Latin America in recent years there has been a decrease in the growth of remittances, in Guatemala significant growth is reflected, which is recently explained by the immigration policy of the United States, by President Donald Trump, said Pedro Prado, an economic analyst of Thus.
“Remittances constitute an important complement to the entry of families” and when a burden like that, shipments could be minor, he added.
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Another point that must be known, as he comments, is whether the law proposed in the United States establishes mechanisms to charge the tax, such as demanding more information from the migrant person in remittance sending channels, which can cause fear in people.
That could also have an impact for the national economy, since remittances have been shock absorber and represent up to 19% of GDP by consumption.
Remittances “are not only necessary to complement the income of families because in the country there are no opportunities to generate better income. If these received are reduced, a very gloomy panorama is drawn in relation to family income and, in general, to the country’s economy for the important role via consumption they represent,” Prado said.
Threat in 2019
In 2019, during Trump’s first mandate, said president threatened Guatemala with actions such as vetoes, tariffs and taxes on remittances, arguing that the country decided to break a immigration policy agreement to be a “third safe country.”