A 5% tax in the United States to remittances would have a limited impact among Mexican migrants, as it would affect 4.1 million of the 12.7 million residing in 2024, according to estimates by the BBVA financial group.
In 2024 Mexico received 62.5 billion dollars in remittances, mainly from the United States, which represents a key source of income for millions of Mexican families, recalled the economic analysis area of the financial group in a report.
The document indicates that of the 12.7 million Mexican migrants living in the United States last year, according to data from the Current Population Survey, 4.5 million had US citizenship, about 3.7 million were permanent residents or had some other regular immigration status, such as a visa, and 4.5 million were not documented.
Within that last group, around 400,000 were beneficiaries of the Deferred Action program for children’s arrivals (DACA), which gives them protection against deportation and permission to work.
Therefore, BBVA estimates that the Mexican migrant population that could be directly affected by the tax proposal amounts to about 4.1 million people, and that the rest of the Mexican migrant population, around 8.6 million, which also sends remittances, in principle would not be affected.
BBVA added that when considering an estimate of a drop of 1,563 million dollars due to remittance flows there would be no significant problem in the balance of payments, since the current account deficit would increase only by 0.08% of GDP.
He stressed that it will be important to follow up on a possible recomposition in the balance of payments, in which a decrease in remittance flow could be observed, but an increase in bank transfers.
“It is important to note that next year a greater decrease in remittances could be registered, which would be explained by a drop in the economic activity of the United States, derived from the erratic commercial policies adopted by that country, which could cause an increase in the unemployment rate. This possible reduction would not be related to the tax on remittances,” he said.
He indicated that the cost of sending $ 350 from the US could go from $ 6 to $ 23.50, which would motivate the issuers to avoid payment through different strategies.
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If the tax is completed, the firm identified three alternatives that migrants could use to avoid it: resort to the support of family or friendships with citizenship or residence in the US, opt for banking to receive remittances through interbank transfers, and use informal shipping channels.
BBVA does not rule out that if the tax promotes the use of informal channels for the sending of remittances, and those means are strengthened, the participation of criminal organizations could be encouraged.
“It is possible that a part of migrants resort to informal channels for sending money, as a strategy to avoid tax. If the tax encourages the use of these unregulated mechanisms and come to consolidate, there is a risk that criminal organizations will be involved in these activities,” he warned.
He estimated that Tamaulipas (-4.4%), Guerrero (-4.3%), Puebla (-3.6%), Oaxaca (-3.6%) and Veracruz (-3.4%) would be the states most affected by the Remittance Tax.
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Although the measure is still in legislative process, and has generated divisions even among Republican legislators, the possibility of approval has set alerts both in Mexico and between defense groups of migrants in the United States.
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