The Impact of Remittance Taxes on Digitalization
A 5% tax on remittances sent from the United States to Mexico could undo recent achievements in digitalization. In recent years, the costs to send remittances from our northern neighbor have dropped significantly, thanks to the fact that these transactions are now conducted digitally and without the need for cash.
Fintech companies like Nu, Mercado Pago, Bitso, Wise, and Ualá have rolled out services to attract a larger number of customers. The reception costs for those receiving this money decrease when funds are automatically deposited into a bank account or fintech account. According to data from the Bank of Mexico (Banxico), 99.1% of the remittances entering our country are made through transfers, and last year, there were $64.745 billion in remittances recorded. The average remittance in 2024 was $393 per transfer, with fees ranging from $4 to $35. A study by Edgar, Dunn & Company (EDC) indicated that Mexicans lost $446 million in hidden fees for international money transfers last year. "Digital remittances cost less than $4," stated Carlos Marmolejo, CEO of Finsus Mexico, one of the services offered by the digital platform. BBVA Mexico Research mentioned that estimating the impact of the tax on remittances is complicated. "It’s likely that those sending money will seek other alternatives to maximize the value of their transfers to their families in Mexico, which may result in some of those flows not being officially reported as remittances," the firm commented. Profeco estimated that during the early weeks of May, the average cost to send $350 from the United States to Mexico was nearly $6. "Implementing a 5% tax on the amount sent would increase that cost by $17.50, raising the total expense to $23.50 per transfer. This nearly quadruples the actual cost of sending remittances," they stated. Expansión attempted to obtain a response from Bitso and Nu, but did not receive feedback; Mercado Pago chose not to comment.
Proposal in the U.S. On May 13, Republican lawmakers introduced a fiscal reconciliation plan for 2025, which includes, among other measures, the creation of a 5% tax on remittances sent from the United States abroad. It’s estimated that $22 billion could be raised over a 10-year period. The funds generated would be directed toward border security and the fight against drug trafficking. The Mexican government has indicated that this measure is discriminatory, as it particularly affects individuals who cannot prove their citizenship. The issue of taxes on remittances is critical, as it could discourage the use of digital methods for sending money, thus impacting financial inclusion and cryptocurrency—sectors that are currently growing. It’s important for both the Mexican government and financial institutions to prepare for any changes in user behavior, seeking solutions that maintain access and reduce sending costs. Increased investment in digital infrastructure could be key to mitigating the impacts of harmful fiscal measures.
