President Donald Trump’s “One Big Beautiful Bill Act” (OBBB) is looking uglier by the day to select groups as features of the bill become more known. Not widely discussed, there is a provision in OBBB that could impact our Filipino community in the way of money remittances. Proposed Section 4475 of the OBBB seeks to impose a new excise tax of 3.5% on international money transfers (or money remittances) conducted by “non-citizens.” Prior to this proposal, the U.S. did not collect taxes on international money transfers. The new tax means less money will go to the recipients in foreign countries and add to the U.S. coffers.
That dollar amount could be negligible for infrequent remittances, but a tax of 3.5% could mean a world of difference to poor families who rely on every dollar sent to survive. Money remittances is a longstanding tradition in the Filipino community for both immigrants and citizens. We’ve all sent money remittances to the Philippines on occasion to assist family members with basic needs like education and healthcare or just as a gift during the holiday season.
For Overseas Filipino Workers (OFWs) in the U.S. money remittances go toward sustaining their spouse and children’s daily living, to pay for their home, food, future. Experts say to low-income immigrant families who depend heavily on sending money back home, this tax can create a significant financial burden. For many, even a small additional cost will matter. For example, if an OFW sends $1,000 monthly through a personal U.S. bank account to family, with the proposed tax, the OFW now has to pay an additional $35 per month, costing an additional $420 a year. That’s a considerable amount for a tax burden that was never there.
It is these OFWs who will be most impacted by this provision, as many of them could be taxed multiple times, by way of income tax and remittances. The provision will be a tax for remittance senders who are green card holders, foreign students, temporary residents like OFWs and others, and lawful permanent residents.
It’s yet another anti-immigrant tool for Trump
When you look at who’s being targeted (all non-US citizens) it’s clear that this bill is an anti-immigrant provision meant to discourage illegal foreign workers coming into the U.S. and in fact one piece of Trump’s overall arsenal of anti-immigrant weaponry. It discourages illegal immigration by imposing a financial disincentive on sending money abroad without legal status.
Impact on remittance industry
Not only will this provision hurt Filipinos supporting their families abroad, but it could also hurt the money remittance industry which could force smaller companies to add larger fees just to survive that ultimately shrinks further the amount of money sent over. The remittance transfer provider (RTP) or the entity facilitating the transfer will be responsible for collecting the tax from the sender and pay that tax to the IRS. This exposes the RTPs to penalties for failure to properly report and remit.
Financial institutions will need to work with the US Treasury to become a qualified remittance transfer provider. Qualified institutions would then be required to automatically deduct the tax from any amount exceeding $15 transferred internationally, unless the sender can prove their citizenship. The tax involves additional paperwork and diminished privacy.
To avoid the tax, this could push some senders toward informal, unregulated black market transfer methods which channels can be risky, less transparent and increase the likelihood of fraud.
Philippines economy and remittances
On top of added personal hardship, this tax can lead to the reduction of money flowing into countries like the Philippines, India, China, Mexico — the biggest remittance countries. According to the Bangko Sentral ng Pilipinas (BSP), personal remittances from overseas Filipinos hit a record-high in 2024 at over USD38 billion. The United States is the biggest source of cash remittances to the Philippines. BSP reports OFWs and their families have been an important market for many goods and services in the economy, including big-ticket items such as homes, vehicles, private school education and investments. Remittances are major contributors to the Philippines overall GDP and could harm their overall economy, expert say.
For now, there are loophole
The Joint Committee on Taxation estimates the tax will generate for the U.S. government just $26 billion over the next 10 years. The Tax Foundation says the bottom line: this is a small tax base with a big compliance burden. Its primary impact will be far more paperwork, not more revenue. Business transfers via corporate or LLC accounts are exempt. A potential problem would be for businesses with international operations or supply chains. Many of those business transactions will need to prove they are non-remittance in nature. Creating a detailed accounting of these transactions is a waste of everyone’s time.
The Tax Foundation also says there are ways (besides black-market channels) to avoid the 3.5% tax like sending cash through packages or through digital assets such as cryptocurrency. The most convenient and obvious choice is to simply have an American citizen to wire money on these non-citizens’ behalf to avoid paying the tax.
It’s clear these major loopholes are purposefully not closed. This sends a tacit acknowledgement that foreign workers contribute positively to the U.S. economy. These Republicans (crafters of the provision) know that and really want foreign workers in the U.S., but not those coming in illegally.
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