Wed | Aug 12, 2020

Remittance blow? - Diaspora rep says don't expect strong opposition to proposed US law to tax remittances

Published:Tuesday | April 25, 2017 | 12:00 AMJovan Johnson

Don't expect "strong" opposition from the Jamaican diaspora in the United States to legislation proposed to tax remittances sent to countries like Jamaica, Irwine Clare, a key New York member, said.

The tax would be used to fund the wall President Donald Trump campaigned on and insists will be built at the US border with Mexico to curb illegal immigration.

Republican congressman from Alabama, Mike Rogers, introduced the 'Border Wall Funding Bill' on March 30. It is to amend the Electronic Fund Transfer Act by requiring a charge of two per cent on the US-dollar value of any money being sent to Jamaica and 43 other countries covering Latin America and the Caribbean.

Many of those countries, including Jamaica, have poor populations that depend heavily on remittances. Minister of Foreign Affairs and Foreign Trade Minister Kamina Johnson Smith is "on top of this", state minister in the finance ministry, Fayval Williams, said, adding that she will allow the minister to speak on Jamaica's response.

Clare, meanwhile, said he was not "surprised" at the proposed law, because with Mexico making it clear to Trump that it would not fund the wall, it was "obvious" the idea to tax remittances would have been entertained.

"The president did say that Mexico will pay for the wall one way or another. And, he recognised that immigrants send home billions of dollars," the managing director of the Caribbean Immigration Services in New York told The Gleaner.

He said the diaspora groups will oppose it, even with the US House of Representatives and Senate in Republic hands, though a "strong opposition" should not be expected. "People may disagree with me on this, but if we have not been more aggressive on the immigration front, I don't see a whole lot of issues taking place on this front. I don't expect a major pushback."


... Good chance bill will be passed


Speaking on RJR's 'Beyond the Headlines' yesterday, Wayne Golding, an attorney-at-law and member of the Jamaica Diaspora Advisory board, said the "bill has a very good chance of being passed" based on the make-up of the US Congress.

In this region, Mexico is the number one recipient of remittances out of the US; Jamaica comes up at 14th, according to Lawrence Watson, the president of the Jamaica Chamber of Commerce, who added that people depend on the money to cover things like utility bills and school fees.

Jamaicans here received about US$2 billion in remittances from overseas last year, according to the Bank of Jamaica. That's about 16 per cent of gross domestic product.

Trump proposed US$1.5 billion for the wall as part of a spending bill that must be passed by Friday to avert a government shutdown. But, yesterday with Democrats insisting they would not support it, Kellyanne Conway, one of Trump's key advisers, said funding for the wall would be left out. White House spokesman Sean Spicer later asserted that "priorities have not changed".


... Potential social fallouts


If the tax on remittances goes through, the impact, based on other country's experiences could include a reduction in amounts remitted and potential social fallouts. That would come against results from a report released last Friday by the World Bank, which said Latin America and the Caribbean was the only region to see growth in remittances in 2016, estimated at US$73 billion, an increase of 6.9 per cent over 2015.

Overall, the report said remittances to developing countries in 2016 amounted to US$429 billion, a decline of 2.4 per cent over US$440 billion in 2015 - "a trend not seen in three decades", the bank said.

According to the report, several high-income countries that are host to many migrants have been considering taxation of outward remittances, to raise revenue or discourage undocumented migrants.

However, imposing the taxes could be a "bad idea", the report said, because, among other reasons, it could introduce double taxation as persons are sending from incomes that have already been taxed.

It also said a tax could raise the cost of remittances and that would be "in direct contravention" of G20 commitments and the Sustainable Development Goal of reducing remittance costs.

Last February, the US Government Accountability Office suggested that the imposition of a remittance tax could yield revenue less than the cost of tax administration to administer the system.

The legislation (HR1813) has been referred to the House Committee on Financial Services and the Committees on Foreign Affairs and the Judiciary.