Experts Weigh In on the Potential Remittance Tax
According to Joan Domene, senior economist at Oxford Economics, the impact on remittances flowing into Mexico due to a potential 3.5% tax by the US government, if approved by the Senate, won’t be a one-to-one effect.
This implies that there won’t be a proportional reduction. Mexicans sending remittances will ensure their relatives in Mexico continue receiving the usual amount of 6,000 pesos per month, and they will cover the tax in the US. Domene emphasized that “20 years ago, senders paid 40 dollars in remittance fees and still sent them.”
Economists’ Perspectives on Remittances
Carlos Serrano, chief economist at BBVA México, echoed Domene’s sentiment. He stated, “I would be more concerned about the slowdown in the US economy and its effect on the labor market and sectors where Mexican immigrants are employed. If it continues to deteriorate, there will be a more significant impact on remittance-sending capacity.”
Pamela Díaz, economist for Mexico at BNP Paribas, highlighted that the integration of the Mexican workforce in the US and its diversification makes remittances more resilient. She believes that remittances will depend on the strength of the US economy and labor market growth.
Economic Activity and Exchange Rate Influence
Analysts from Monex and BBVA believe that the economic activity in the US and the exchange rate’s impact will have a more significant effect on migrant employment opportunities than the tax execution itself.
Janneth Quiroz, director of economic, currency, and securities analysis at Monex’s financial group, noted that a weaker dollar would reduce the purchasing power of remittances and likely decrease average remittance amounts.
Juan José Li Ng, a remittances expert at BBVA, explained that the official remittance figures represent money transfers through a remittance service from one country to another. In 2024, $64 billion in remittances reached Mexico via these channels.
US House of Representatives Approval and Reactions
The US House of Representatives approved a 3.5% tax on remittances sent from the country as part of the budget package effective in October.
Following this news, Mexico’s President Claudia Sheinbaum celebrated the reduction and thanked Mexico’s ambassador to the US, Esteban Moctezuma, and a group of Mexican senators who traveled to Washington to advocate for migrants’ interests.
Sheinbaum acknowledged the role of Mexican compatriots in the US, who sent letters, emails, and social media posts expressing their opposition to the tax.
