Overseas Filipino Workers (OFW) and their families, Americans living abroad and Filipino expats heaved a sigh of relief after a proposed 5% excise tax on money remittance transfers whittled down to 1% when the “Big Beautiful Bill” became law. Still, any new tax may cut critical income for families facing financial hardship, remittance industry experts say.
While some individual recipients of remittances could experience a greater impact, the Philippines Department of Finance (DOF) estimates the new 1% tax on remittances from the United States to the Philippines is expected to have a minimal impact on the Philippines economy. The DOF says it will affect only 0.009% of the country’s GDP.
The new 1% tax on remittances goes into effect Jan. 1, 2026. The Asian Development Bank (ADB) projects the tax could cost about $250 million of a whopping 38-40 billion dollars annually, about 9% of the nation’s GDP.
ADB found that during the global recession during COVID-19, remittances to the Philippines slowed down by a mere 1.7%. A tax of this size shouldn’t move the needle.
The Philippines ranks 4th in the world in money remittances behind India, China and Mexico. It has seen a steady increase over the past 10 years, with about $2 billion increases every year, primarily boosted by the 2.2 to 2.3 OFWs working in the U.S., Asia, Saudi Arabia, UAE and Europe.
Including overseas Filipinos in the OFW count brings the total to over 10.8 million, many of whom regularly send remittances. With that many Filipinos abroad, this is why remittances to the Philippines remains steady and strong, experts say.
Cash remittances from overseas Filipinos rose 3.2 percent to $26.03 billion in the first nine months of 2025 from $25.23 billion recorded in the same period in 2024, according to the BSP, which is on target to finish at or above the normal annual total.
Usual Christmas boost Bangko Sentral ng Pilipinas (BSP) reports typically there is a surge in December of money remittances because of the Filipino tradition of aguinaldos, gifting money for Christmas. BSP reports typically over $3.73 billion in remittances are sent in December alone. It says they are seeing higher remittances because of the adoption of digital remittance platforms, which have made transfers faster and cheaper.
The new 1% tax does not apply to bank-to-bank and app wire transfers and only applies to cash, money order and cashier’s check. Remittance industry experts say there are many ways to work around that tax. The proposed tax would be likely to reduce remittances sent through formal channels such as banks and money transfer operators like Western Union.
With less money flowing through traditional channels, industry experts say money transfer operators might be forced to raise fees. They calculate that the 1% tax actually becomes higher and more like 1.6% if fees are increased.
Supporters of the tax say it will boost U.S. Treasury revenue, improve money-tracking, and make it harder for illicit funds to leave the country.
Who must pay the tax? Originally U.S. citizens were excluded from the tax, but the new law includes them along with, U.S. green card holders and non-citizens sending money abroad from a U.S. account. The sender pays the tax — not the recipient.
Aguinaldo is a traditional gift usually in the form of cash. The word originates from Spanish meaning Christmas bonus, and has evolved into a cherished custom where parents, godparents and elders give money to children and younger relatives. When sent as remittances from abroad during Christmas, it serves to strengthen family bonds and bridges the great divide physically.
Pinoy Kitchen blog describes aguinaldo, “[It’s] more than just wrapped trinkets and shiny envelopes [with money inside], aguinaldo embodies the heart of Pasko (Christmas) – a season overflowing with generosity, family, and the simple act of spreading joy.”
The blog explains it’s historical origin, “it originally referred to the Christmas bonus given to colonial soldiers. But in the Philippines, the term took on a new meaning, woven into the fabric of resistance against Spanish rule. Filipino revolutionaries used aguinaldo as a symbol of unity and support, offering gifts to one another to sustain the fight for independence. With the dawn of freedom, aguinaldo evolved into a cherished Christmas tradition.”
An aguinaldo is not just a cash gift but could be anything from toys to trinkets or personalized items like in other parts of the world where Christmas is celebrated. “The spirit of aguinaldo transcends social barriers and economic limitations. In Filipino culture, the act of giving is paramount, regardless of one’s wealth or status. A simple fruitcake baked with love or a meticulously wrapped bar of soap holds the same value as a store-bought toy, for it’s the thoughtfulness and the generosity that truly matter,” the blog mentions.
Will a shaky economy and recession deter remittances? Unemployment has soared to its highest since the height of COVID-19, the most recent jobs report shows. Americans’ confidence in the economy is low. High cost of grocery and energy have many Americans including those in the Hawaii’s Filipino community concerned. Despite times of austerity, some Filipinos say this will not discourage them from sending aguinaldos.
Eve Salvador, Orange County, former Moanalua resident, said “Growing up, each Christmas my parents who are immigrants would send aguinaldos to their parents and siblings on both sides of the family. They’d send remittances on other occasions like when there’s a health emergency, funerals or special events. My parents weren’t rich but middle-working class. I know it was difficult for them to come up with annual aguinaldos because we are a family of five children. But it never stopped them from giving graciously and from the heart.”
Salvador says she has only a few cousins left in the Philippines, “Most of my family are in the U.S. and the older generation has passed on. But me and my other siblings in memory of our parents and in keeping this tradition alive – something our parents would want – we still send aguinaldos.”
Flor Martinez, radio announcer, Ewa Beach, said “To me, it’s especially important to send money during the Holiday Season, like Christmas and New Year to brighten their days and lift their spirits. I still have close family in Barangay Bayawas in Urdaneta, Philippines. I send money every month for family and for the children’s school needs, especially for tuition. I have to be nice and helpful because in return, they take good care of my properties as if it were like their very own. It’s been over 10 years now that I been regularly sending money to them.”
Jerwyn Pascual is an immigrant who arrived in Hawaii in 2017. “I work as a cook. Money is tight but I’m happy to send money to my family back home. As long as I have a job, it’s something I will keep doing because my family needs the help and I feel good about giving during Christmas.”
He shared a moment of gratitude, “My aunty Flora never married. Growing up she would buy clothes and shoes for me. She often brought over food for me and my brother and sister. When I think of these times and her generosity, sending money to her during the holiday is my way of showing appreciation. I hope to see her again, maybe during Christmas, but not this year.”
Who do Hawaii Filipinos send remittances to? New immigrants from the Philippines will likely keep the tradition of remittance-giving. Some in the community say the tradition could wane as the Baby Boom generation passes on and younger generation Filipinos have fewer relatives in the Philippines.
Who is receiving remittances and for what reason? Hermelina Apuya, care home operator, Kapolei, “I have sent cash to the Philippines using money remittance but lately, I haven’t used it much because I don’t have many family members back home, but lots of nieces and nephews. I have sent small amounts when relatives were sick or when someone passed away and they needed to pay for funeral expenses. These relatives are usually poor so I’m not expecting any payment in return. I just send money from the heart as the need arises.” On the new tax, Apuya said, “It’s the law, so we need to comply with it.”
Angel Mendoza, retired hotel employee, Honolulu said sending money remittances is convenient. “I have helped my nieces and nephews who are in college to pay for their tuition and other expenses. One of my nephews is working but he still needs help to pay for his children’s expenses.
Another is my wife’s nephew whom we consider as ours since we never had a son. We treat him as if he was our son. We are very close to him. When he got married a little while ago, we went to his wedding. He was so grateful for our support and for spending time with him.”
On the new tax, Mendoza said, “what can you do about it? Prices for everything are up. I can’t really complain so I just go with the flow.”
The power of remittances Often called the lifeblood of the Philippines economy, remittances are crucial to sustaining millions of Filipino families. Remittances stabilize the country’s economy and support local business with increased consumer spending.
OFW families use remittances to pay for essentials such as groceries, utilities, clothing, transportation, healthcare and investments. It is also said it bolsters entrepreneurship enabling small businesses to prosper.
Education. Teachers in the Philippines say remittances play a crucial role in education. It’s a positive effect on human capital. If it were not for remittances, millions of children would not be able to cover tuition fees, school supplies or transportation. Educators say remittances help reduce dropout rates and increase enrollment. They said studies show OFW families have greater opportunities to higher education.
Housing. Real estate accounts for a large bulk of OFWs investments that social workers say is the building block to a more stable community. It drives demand for affordable and midrange housing. Without stable living conditions for millions of Filipino OFWs, the country would be experiencing much worse poverty and crime, they say.
OFWs influence on their country are so profound that they are heralded as heroes. During a recent meeting in Osaka, Japan, Philippines President Ferdinand Bongbong Marcos hailed OFWs as “Bagong Bayani” or modern-day heroes.
The President pledged to prioritize the needs of Filipinos working abroad. “I recognize the weight of your sacrifice, and the strength it takes to provide for your families from afar. That is why we will never tire of honoring you and finding ways to improve your lives. You are at the heart of our government’s efforts, and you deserve not only our gratitude, but you deserve our full support.”
OFWs are a top priority for the Philippines government that it has four government agencies dedicated to helping OFWs in legal assistance, deployment, training, reintegration, counseling, financial assistance, health and social services, education and scholarship grants, and consular services.
Overreliance on remittances has drawbacks False sense of strength. Randell Tiongson, Director of the Registered Financial Planner Institute Philippines and a well-known financial expert, said “While we celebrate their [OFWs] sacrifice and contributions, we also need to confront a difficult truth: our overdependence on OFW remittances is not sustainable. In fact, it poses serious risks to both our economy and the social fabric of our nation.”
He said the 9% GDP provides to the nation is a false sense of strength. “Instead of building an economy driven by productivity, innovation, and industry, we rely heavily on money earned abroad. That money fuels consumption — but not necessarily production. It’s like receiving allowance without working. With steady inflows of foreign earnings, the urgency for domestic job creation and industrial development lessens. There’s little incentive to reform sectors like agriculture and manufacturing, which should be our long-term economic pillars.”
Emotional toll on kids and broken marriages. OFW children also talk about the absence of a parent or sometimes both. Young children growing up without having a parent’s presence takes an emotional toll leading to loneliness and a lack of guidance. Extended periods of a spouse living abroad are a major cause of broken marriages.
Braindrain. Academics say overreliance on remittances and labor export — especially among highly skilled workers like nurses, doctors, and engineers — leads to a shortage of critical human capital within the Philippines. They argue the brain drain phenomenon can result in adverse effects on sectors such as healthcare, education, and technology, potentially slowing national development and undermining efforts to improve public services. Filipino academics advocate for policies that maximize the benefits of remittances while mitigating the negative effects of brain drain.
A report of Statista in its chart of countries with the most number of educated migrants working in developed countries in the world, the Philippines is third to India and China. Yet, the Philippines population is dwarfed compared to both countries, indicating that the Philippines by percentage is sending abroad far more of its educated population than any country.
Academics say the push away factors causing top skilled and educated Filipinos to work abroad are political instability, low salaries, and limited professional development opportunities. In cases where students receive government assistance in higher education then decide to leave, brain drain is particularly looked upon as an economic cost since they will take with them the value of their training which was sponsored by the government.
OFW remittance will be a part of Filipino culture and tradition for a long time even as the Philippines government works to build its domestic economy and structure. Specific to aguinaldo remittances, conventional wisdom is that as long as Filipino immigration to the U.S continues, so will this cherished holiday tradition.
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