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A coalition of seven leading payments and fintech industry associations has issued a forceful warning to US lawmakers over an "invasive", "unworkable", and "counterproductive" proposal to tax remittance transfers.
In a addressed to Senate Finance Committee chair Mike Crapo (R-ID) and Ranking Member Ron Wyden (D-OR), the heads of the Electronic Transactions Association (ETA), INFiN, the Money Services Business Association (MSBA), The Money Services Round Table (TMSRT), the Financial Technology Association (FTA), the American Fintech Council and the Innovative Payments Association (IPA) have voiced strong opposition to the proposal, currently under consideration as part of President Trumps so-called Big, Beautiful Bill, which has already passed the lower House of Representatives.
The provision would impose a 3.5 percent tax on all remittance transfers, defined broadly to include any cross-border payments initiated by US consumers to recipients abroad, encompassing not only traditional remittances but also payments for tuition, family support and bills.
The tax would be paid by the sender and would apply to transactions facilitated by banks, licensed money transmitters and digital asset platforms.
The proposal includes a complex exemption mechanism whereby financial institutions can avoid the tax only if they enter into agreements with the US Treasury to verify a senders citizenship status, potentially requiring collection of sensitive personal data such as passports and Social Security numbers.
Senders not verified in this way could later seek a tax refund by providing their personal details to the Internal Revenue Service (IRS).
Undermining AML efforts
The industry associations argue that the proposal would create serious privacy concerns and increase the risk of data breaches, and warn that it will create a substantial operational, training and compliance burden for financial institutions that provide remittance services on financial institutions.
They also warn of potentially exclusionary effects, especially for citizens unable to readily produce proof of citizenship, such as a passport or birth certificate.
The trade associations, whose members include incumbent financial players such as Wells Fargo, Visa and American Express, as well as fintechs like Revolut, Plaid and Klarna, further caution that the measure could undermine national security and anti-money laundering (AML) efforts, as the added cost and bureaucracy may drive consumers toward unregulated or underground financial channels.
This policy runs directly counter to the Administrations anti-cartel and anti-trafficking goals, the letter stated, noting that increased use of informal remittance networks would reduce transparency and hinder law enforcements ability to track illicit finance.
Impact on small businesses
Beyond privacy and security implications, the letter also warns of a ripple effect on small businesses, namely local retailers and financial service providers who serve as agents for remittance services.
These businesses greatly benefit from the foot traffic generated by customers seeking financial services and subsequently making additional purchases, the trade associations suggest.
They add that in addition to the invasion of privacy and the requirement to hand over sensitive personal information to conduct a transaction, the remittance tax will also drive away customers because of the increase in costs.
This will discourage the use of remittance services and therefore of these businesses generally, resulting in reduced sales, lower tax revenue and even service discontinuation.
The ripple effects of this burden could cause serious harm to the small business ecosystem that supports local communities and economies.
Regulatory confusion
The signatories also note that the measure risks disrupting ongoing efforts to harmonise money transmission regulation across the different US states.
They suggest that the taxs implementation would conflict with the Model Money Transmission Modernization Act, an initiative backed by the Conference of State Bank Supervisors (CSBS), and introduce new legal complexities for multi-state operators.
Whereas proponents argue that the tax could raise an estimated $8bn over five years, industry leaders counter that this sum represents a minuscule 0.00037 percent of the broader tax package and would result in an outsized cost to consumers and businesses alike.
They also cite opposition from prominent policy think tanks, including the Cato Institute, which described the proposal as a vehicle for increased government surveillance, and the American Enterprise Institute, which warned it would overburden taxpayers and businesses with more red tape and less privacy.
The associations urge lawmakers to strike the provision entirely from the legislation, summarising that a tax on remittances is not just regressive and harmful; it is counterproductive.
This remittance tax provision in particular mandates a massive invasion of privacy by private businesses and the federal government on American citizens, creates undue tax burden for law-abiding Americans, reduces business revenue, complicates regulatory efforts, and hinders law enforcement.
