MONETARY authorities are studying the likely impact of a 3.5-percent tax on remittances contained in US President Donald Trump's "One Big Beautiful Bill," which analysts said would ultimately weigh on economic growth if approved by Congress.
Remittances from overseas Filipino workers (OFWs) — a key driver of domestic consumption and often described as one of the pillars of the Philippine economy — hit a record $38.3 billion last year, equivalent to 8.3 percent of gross domestic product (GDP).
Some 40 percent of that is classified as having come from the US, although this is mostly due to remittance centers in various cities abroad having coursed the money through banks that are mostly located in the US.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said they were still "trying to find out" the likely impact of a US remittance tax, adding that they were also "hoping" that it would not have a significant effect.
The proposed tax — the One Big Beautiful Bill has yet to be approved by the US Senate and the original rate was a higher 5 percent — will apply to non-US citizens, including green card holders and those holding H-1B visas.
It is among the measures proposed by US lawmakers to fund tax cuts under Trump's One Big Beautiful Bill and is also seen as a way of curbing illegal migration.
The Center for Global Development (CGD) last month said that the Philippines could be among the countries to be hardest hit, estimating a $476.53-million loss.
This is composed of $176.82 million from the tax itself and $299.7 million from price effects, equivalent to 0.1 percent of gross national income (GNI), or GDP plus income from abroad.
According to the BSP, last year's $38.3 billion in remittances was equivalent to 7.4 percent of GNI.
The CGP cited a 2015 study commissioned by Western Union, which showed that a 5 percent tax on remittances sent to the Philippines would lead to a total decline of 9.9 percent, a drop in formal transfers of 17.7 percent and a rise in informal transfers of 21.6 percent.
The CGP said the same outcomes — reduced remittances and a shift to informal remittance channels — would occur should the Trump tax take effect. It could even force an increase in illegal immigration, it added.
òòò½´«Ã½ senior fellow John Paolo Rivera said that the proposed tax could substantially reduce the volume of remittances routed through regulated financial channels as OFWs seek ways to avoid the additional cost burden.
"Given that the US is the top source of remittances to the PH, this could dampen the volume of formal remittances routed through the US," he said.
"Filipino workers and immigrants in the US, especially those who are not naturalized citizens, would shoulder the tax if passed."
SM Investments Corp. economist Robert Dan Roces said the tax would disproportionately affect Filipino households who depend on remittances for education, health care, food, housing, and other needs.
"With millions of Filipino families depending on these funds for basic needs, education, and health care, the tax represents a risk to household welfare and national growth," Roces said.
Some relief could come from a peso depreciation, he noted, as the higher peso value of incoming dollars would partially offset the decline in volume.
"The silver lining: peso depreciation will cushion the impact by increasing the local currency value of whatever remittances still flow in, while boosting competitiveness of Philippine exports," Roces said.
