Tax on remittances

According to the World Bank, remittances from migrants in the United States to their countries of origin reached $669 billion by December 2023. After India, Mexico is the second largest recipient of remittances in the world.

From September 2023 to August 2024, Mexicans sent $64.872 billion, according to the Bank of Mexico.

On July 4, the United States approved a 1 percent tax on cash remittances, which will take effect in 2026. Bank and electronic transfers were exempt from this tax.

To understand the issue in depth, Línea Abierta invited Isabel Cruz, executive director of the Mexican Association of Social Sector Credit Unions (AMCUSS), based in Oaxaca, Mexico. For years, the Mixtec anthropologist has developed a scheme of small banks formed with remittance savings converted into “migrant bonds” in rural communities in Mexico. These funds are used to grant loans and promote micro and small businesses.

At AMCUSS, “we teach how to save, how to lend, how to collect. So there has to be a lot of balance between saving on the one hand and lending on the other.”

Cruz describes the tax on remittances as “part of a war against migrants and against Mexico, because most migrants are of Mexican origin.” According to his analysis, part of Trump’s strategy to stay in power was to exploit the xenophobia of Americans who feel threatened by global economic changes.

For Cruz, the measure is “unconstitutional and discriminatory.” He therefore described it as “financial terrorism.”

He proposes, “The idea of microbanking is that individuals, families, but also cooperatives or women’s associations can have a place to have a bank account, where they can deposit their savings and make investments,” says Cruz. He adds that in the concept of microbanking, which is a small territorial space, a legal entity that exists in Mexican law is used, called a Community Financial Society.