go through Aubrey Rose A. Inosante, reporter
The Treasury Department (DOF) said the proposed tax on remittances by U.S. President Donald J. Trump will give the “minimum” of money sent home by overseas Filipinos between $19.1 million and $148.4 million.
“We see the estimated impact on the economy with little impact. The expected loss of remittances could be only $19.1 million to $148.4 million, of the $36.5 billion expected remittances in 2026,” DOF told the BusinessWorld Thursday.
The central bank’s cash remittance growth forecast is 2.8% this year, and 3% in 2026.
Mr. Trump calls a large bill that lists his administration’s tax plan more broadly, won Senate approval and approved some changes to the U.S. House of Representatives bill in May.
One of the key changes is a 1% excise tax on all remittances, which also applies to U.S. citizens, mitigating the initial proposed 3.5% tax on foreign workers.
The bill will go to the House again and may require settlement before final approval and the president’s signature.
The DOF said the U.S. Senate version of the remittance tax will affect 4.4 million overseas Filipinos in the United States.
“Although 41% of remittances are routed through the United States, not all of them are from Filipinos in the United States because remittances are routed to the United States through communication banks,” it said.
In 2024, cash remittances rose 3% to $34.49 billion. The United States remains the highest source of cash remittances, accounting for 40.6% of the total.
Mon Abrea, founder and chief tax consultant at the Asia Consulting Group (ACG), said the legislation would slow down the remittance process – whether it is to reduce the amount of formal remittances or by pushing it to underground remittances.
“While the Ministry of Finance only estimates that impact 0.003% of GDP, this additional burden could drive senders, especially undocumented Filipinos, to use informal or unregulated channels that are increasingly difficult to monitor,” he said.
The lower exchange rate for remittances in a later version of the legislation provides some relief for overseas Filipino workers, but may still undermine remittances and consumption.
“Of course, lower tax rates are much better. On the extent to which this tax is only levied on U.S. remittances, the negative impact may be lower, not only because of the rate being reduced by 1%,” said Calixto V. Chikiamco, president of the Economic Freedom Foundation.
“However, the impact on our economy is that OFW families will receive less money and they may be spending less,” he said.
Miguel Chanco, chief emerging Asian economist at Pantheon macroeconomics, said slowing down is “positive development.”
In the long run, Mr Chanco believes that even if the interest rate of 3.5% is re-imposed, the transfer of funds will not be significantly affected.
