Bangladeshis in US may suffer as 5% tax proposed on sending remittances by non-citizens

A new law is set to pass in the United States that would require non-citizens to pay a 5% tax on money sent abroad.  

President Donald Trump initially proposed the measure under the name "One Big Beautiful Bill Act."

On Sunday (18 May), the bill narrowly passed the US Congress Budget Committee by a single vote. If enacted, the law would significantly impact thousands of Bangladeshis living in the US.

The bill includes provisions for tax cuts, reduced government spending, and enhanced border security. One of its most controversial components is the imposition of a 5% tax on remittances sent from the US to other countries, according to a report by NDTV.

The "One Big Beautiful Bill Act" stipulates that all remittances will be taxed at 5%. US banks and money transfer service providers will be responsible for collecting the tax and remitting it to the government. If the tax is not paid at the time of the transfer, the service provider will still be held liable.

US citizens and individuals born in the country are exempt from the tax, but they must provide proof of citizenship and enter into a special agreement with the US Treasury. The bill does not include any exemptions based on the amount of money sent, meaning non-citizens will be taxed even on small remittance amounts.

India is expected to be the hardest hit by this proposal, as it receives the largest share of remittances from the US. In the 2023–24 fiscal year, India received $118.7 billion in remittances, with 27.7% originating from the United States. Most of this came from Indian nationals working in the US on H-1B and L-1 visas. In fact, over 70% of H-1B visas issued last year were granted to Indian workers.

The bill is now awaiting a full vote in the US Congress. If passed, it could have a profound economic and social impact on the approximately 4.5 million Indians living in the US.

Abul Kalam, a Bangladeshi immigrant who has lived in New York for 15 years and works 10 to 12 hours a day at a restaurant in New Jersey, sends money home each month. His remittances support his family, pay for his daughter's education, and cover medical costs for his younger brother. "If this tax is imposed, people like us will suffer the most — and so will our families back home," he said, expressing deep concern.

Rashida Akhtar, a development activist from Bangladesh, remarked, "Remittances are not just for consumption — they build homes, fund agriculture, and pay for education. Taxing this lifeline will disrupt entire communities."

A former deputy director of Bangladesh Bank warned that taxing remittances could reduce legal money transfers and drive people toward illegal channels like hundi which would be dangerous for Bangladesh's economy.

Latin American countries are also expected to be heavily impacted. In many of these nations, families depend on relatives working long hours in the US for their livelihood. Experts warn that the measure could disrupt economic stability in those regions and also affect the US's own humanitarian and economic interests.

Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue, said, "Any move to reduce remittances ultimately harms the US itself. These funds are vital lifelines for families in poor towns and villages where job opportunities are limited. If these lifelines shrink, more people may be driven to cross the US border illegally."

However, supporters of the tax argue that it would put pressure on undocumented immigrants and generate revenue for the government.

Mark Krikorian, executive director of the Center for Immigration Studies, stated, "People come to the US primarily to work and send money home. If that becomes more difficult, the incentive to migrate here will decrease."