New tax on migrant remittances could hit African economies
The new proposal by President Donald Trump's administration, introduced on Thursday, about a 5% tax on private foreign money transfers will significantly impact the economies of African countries and migrant families. Each year, migrants living in the U.S. send about $13 billion to Africa, according to Agence Ecofin.
The tax is part of a project known as the "Great, Beautiful Act," which was passed by the U.S. House of Representatives on Thursday. The bill, now heading to the Senate, aims to help President Trump fulfill his campaign promises by extending the tax cuts implemented during his first term.
According to financial analysts, these cuts could seriously increase the federal deficit. Therefore, to reduce their impact on the budget, lawmakers have proposed, among other measures, implementing a tax on money transfers sent by migrants.
This tax will not apply to U.S. citizens, but to about 46 million migrants living in the United States, especially those residing there illegally. This group includes over 2 million African migrants who send part of their earnings to families back in Africa. In 2021, for instance, $5.7 billion was sent from the U.S. to Nigeria, $1.8 billion to Egypt, and $1.2 billion to Kenya.
Billions of dollars derived from corruption and theft
Billions of dollars derived from corruption and theft are transferred from Africa to the United States. The scale of this flow can be evidenced by an agreement made in January between the U.S. and Nigeria concerning the return to the Nigerian government's control of almost $53 million confiscated by the FBI from corrupt Nigerians.
This was only part of more than $100 million that was laundered in the United States and used to buy luxury real estate in California and New York. It was also enough for Nigerians to purchase a 213-foot yacht.
In its report last year, the international organization Transparency International, which reveals and combats corrupt practices, reported nearly $4 billion transferred out of Africa, including to the U.S., noting that this figure comes only from documented cases.
