In a move that could have far-reaching implications for immigrant communities worldwide, American lawmakers have proposed a new bill that seeks to levy a five percent excise tax on international remittances made by non-citizens, marking a shift in US tax treatment of immigrant earnings.
Titled "One Great and Beautiful Tax Bill" tabled on May 12, 2025, the proposal is aimed at preventing taxpayer-funded benefits from indirectly aiding undocumented immigrants.
Under the proposal, remittance service providers would be required to withhold a five percent tax on money transfers sent abroad unless the sender can prove US citizenship or legal status. The collected funds will be submitted to the Treasury.
A joint meeting of Congress in the House Chamber of the US Capitol on December 21, 2022 in Washington, DC.
Photo credit: Photo | AFP
“There is hereby imposed on any remittance transfer a tax equal to five percent of the amount of such transfer,” the draft states.
The US new bill includes provisions that restrict eligibility for public benefits and tax credits to individuals with verified Social Security numbers. It also seeks to eliminate access to Obamacare and Medicare premium tax credits for undocumented immigrants.
Until now, remittances have not been taxed in the US, so the passing of the proposal would represent a significant policy reversal.
The legislation is moving quickly, with the House aiming to pass it by May 26, 2025 -- Memorial Day, a national holiday in the US -- and the president's final signature expected on Independence Day, July 4, 2025.
Once passed, the tax will be collected by banks and money transfer services at the point of transfer, regardless of the transaction's size or purpose, and implementation will be swift.
The news has rattled immigrants, especially Africans whose countries depend on remittances to shore up their home economies.
Data from the Central Bank of Kenya shows that the United States remains the single-largest source of diaspora remittances to Kenya, accounting for 53 percent.
Kenyans abroad sent home $1.23 billion (Ksh159.5 billion) in remittances during the first quarter of 2025.
According to CBK data, Kenyans living and working abroad sent home $427.4 million (Ksh55.4 billion) in January, followed by $422.9 million (Ksh54.8 billion) in March, and $382.2 million (Ksh49.6 billion) in February.
Total remittance inflows between January and March this year represent an increase of $26.4 million (Ksh3.4 billion) from the value of cash sent home during a similar period in 2024.
The World Bank data shows that the total value of remittances sent to home countries in 2023 was approximately $656 billion. These remittances are a significant factor in the global economy and are often sent via American wire services rather than banks or credit unions.
Remittance inflows totalled $422.9 million in March 2025, compared to $407.8 million in March 2024 — an increase of 3.7 per cent. The cumulative inflows for the 12 months to March 2025 increased by 13.5 per cent to $4.972 billion, compared to $4.380 billion in the same period in 2024. These inflows continue to support the current account and the foreign exchange market,' the CBK said.
The latest figures were published along with World Bank estimates that diaspora remittances have significantly overtaken other types of external financial flows to low and middle-income countries across the world, including foreign direct investment within the past decade.
