Who is Affected?
The proposal to tax remittances sent from the United States would primarily affect undocumented workers residing in the U.S., with a limited impact on Mexico, according to Vidal Llerenas, the subsecretary of Industria y Comercio at Mexico’s Secretaría de Economía.
Government Response
Llerenas explained, “Yes, it would have an impact on the country, but fortunately, it’s minor because it applies to people without legal residency.” He added that the government hopes this measure will be removed, as it is not a “legitimate tax.”
Mexico’s President Claudia Sheinbaum continues to advocate for its elimination, stating it’s not a legitimate tax since the money being remitted has already been taxed. Meanwhile, Marcelo Ebrard, Mexico’s Secretary of Foreign Affairs, is negotiating trade agreements with U.S. authorities in Washington.
Why It’s Not a Legitimate Tax
Llerenas emphasized, “It’s not a legitimate tax because it’s taxing income that has already been taxed… Unlike the Impuesto Especial sobre Producción y Servicios (IEPS), when you receive your salary, you’ve already paid taxes on that income. There’s no reason to tax it again when sending it to your mother, for example.”
Implementation Challenges
The official noted that it would be complex to enforce such a tax, as there are numerous ways to send money. He pointed out that most Mexicans would be unaffected if the tax is implemented, as they either hold legal residency or U.S. citizenship.
“We’ll have to see what mechanisms they implement… It won’t be simple to enforce, as there are many ways to transfer money,” Llerenas stated.
Greater Impact on Other Countries
Countries like El Salvador and Honduras would likely face greater repercussions, as a significant portion of their populations consists of undocumented workers.
Remittances Data
In 2024, Mexico received $64.745 billion in remittances, a 2.3% increase from the previous year. According to the Consejo Nacional de Población (CONAPO), approximately 12 million Mexican-born individuals reside in the U.S., with about one-third being undocumented.
Key Questions and Answers
- What is the proposed tax on remittances? The U.S. House of Representatives approved a fiscal package, driven by President Donald Trump, which includes a 3.5% tax on remittances sent by foreigners to their home countries.
- Who is primarily affected by this tax? The tax mainly impacts undocumented workers in the U.S., with limited effects on Mexico.
- Why is the tax considered illegitimate? Since the money being remitted has already been taxed, imposing another tax on it is seen as illegitimate.
- How challenging would it be to enforce this tax? Enforcing the tax could be complex due to various money transfer methods.
- Which countries might experience greater repercussions? El Salvador and Honduras, with large undocumented populations, could face more significant impacts.
