US tax to cut Philippine remittance growth

The United States’ remittance tax could trim the Philippines’ remittance growth by 0.5 percentage point (ppt), the Bangko Sentral ng Pilipinas (BSP) said.

“The impact under the worst-case scenario could be about 0.5 (ppt) or even lower,” BSP Deputy Governor Zeno R. Abenoja told BusinessWorld on the sidelines of an event on Friday.

“But again, behavior could change. For example, it’s possible that the sender will absorb the rate, the additional tax on it, such that in the end, what is received is still the same as what is sent,” he added.

The central bank expects cash remittances from overseas Filipino workers to grow by 2.8% this year and by 3% in 2026.

The 0.5 ppt estimated impact is still “very preliminary,” Mr. Abenoja said, as they are still studying the effects of the remittance tax.

“We still have some time to assess since it’s going to be January next year that it will be implemented. We are trying to confirm and clarify how it will be implemented, so we look at some worst-case scenarios,” he said.

US President Donald J. Trump’s recently passed “One Big Beautiful Bill” imposes a 1% excise tax on cash remittance transfers from the United States to other countries, starting Jan. 1, 2026. This was lower than earlier proposals of a 3.5% levy.

The tax was also initially aimed at non-US citizens but now applies to any remittance sender.

“As you know, the remittances from the US compose the bulk of our overseas Filipino remittances. If you look at the behavior of remittances, they’re used to finance education, health expenditures, and housing. These are necessary expenditures,” Mr. Abenoja said.

In the first five months of the year, cash remittances grew by 3% to USD 13.77 billion from USD 13.37 billion a year prior.

Around two-fifths of the Philippines’ remittance flows come from the United States. Latest BSP data showed that the US was the top source of remittances in the five-month period, accounting for 40.2% of the total.

“We’re looking at these characteristics of flows before we can finalize the impact. Because the behavior may also change such that in the end, the impact could be minimal,” Mr. Abenoja said.

“So, we’re looking at both how it will be implemented and how the senders will adjust to these new rules.”

The Department of Finance  earlier said the tax could impact 12.8% of the Philippines’ annual remittances. This would impact around USD 1.9 billion of the expected USD 36.5-billion remittances from the US in 2026.

In a separate e-mail to BusinessWorld, the BSP said that remittances often remain resilient despite shocks.

“During periods of crisis and uncertainties, overseas Filipino (OF) remittances have generally continued to increase, reflecting the strong altruistic motives of OF migrants and workers to support their dependents regardless of prevailing economic conditions,” it said.

The number of documented temporary Filipino migrants in the US are at an estimated 500,000, the BSP said, though noted that these figures vary.

“These are non-US citizens from the Philippines who hold either green cards (immigrant) or long-term nonresident visas. As a share of total documented migrants reported by the Department of Foreign Affairs, documented temporary migrants comprise 12%,” it added. — Luisa Maria Jacinta C. Jocson, Senior Reporter