Tax policy

Remittances are surviving the new US tax—at least for now.

This article appears in the July/August issue of Global Finance Magazine.

The Dominican Republic isn’t just a tourist paradise; it has a more diversified economy than most Caribbean nations. Yet foreign remittances still reach four in 10 households. Last year, Dominicans abroad sent home a record $11.87 billion, up 10.3% from 2024, according to the Central Bank of the Dominican Republic (BCRD). 

For such a country, 2025 was a banner year. But as of January 1, Washington has been levying a 1% tax on remittances paid by cash, money orders, or cashier’s checks under the One Big Beautiful Bill Act, which President Trump signed last year.

Related: Country Report: The Dominican Republic Is on the Rebound

While the tax has heightened anxiety in migrant communities, the BCRD forecasts a mild impact on the country, with remittance growth slowing to 3.5% in 2026, or roughly $12.2 billion. Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue, a Washington-based think tank, broadly agrees, though for reasons rooted less in the tax than in how Dominicans send money.

“My estimate is about 4% growth this year,” Orozco says. “I wouldn’t argue that the slowdown is due to the 1% tax, but rather to the precautionary fear factor.”

Early data supports his analysis. Patricia Krause, economist for Latin America at Coface, a French trade-credit insurance company, says the levy has yet to leave a mark: “Although there was an expectation that it could affect remittance figures, that has not been the case for the Dominican Republic, at least so far. While remittances reached $4.1 billion in the first four months of 2026 — up 4% year over year — the increase was 11% year over year in April,” Krause notes. 

Broad Regional Trends

According to Orozco’s analysis, remittances across all of Latin America and the Caribbean are projected to grow by 4.7% in 2026, a growth rate that is down from 6.3% the previous year. This indicates that “the slowdown is regional rather than Dominican,” he says.

The reason the tax has landed softly thus far is the taxing mechanism; it applies only to transfers funded with physical cash or paper instruments, not to those paid from a bank account or card, and most Dominicans in the U.S. are able to avoid it. 

“More than 80% of Dominicans hold a bank account, and 60% were already sending money digitally before the tax arrived,” Orozco says. “That leaves roughly 40% who send cash, and that cash is not informal.”

Where Cash Remains King

Ninety-nine percent of money transfers originate through licensed companies like Western Union, and many of those senders also hold a bank account, he adds: “Instead of using cash, they may just use their debit card and avoid the charges.” At the receiving end of the corridor, cash remains king, with about 70% of transfers still collected as cash, a quarter of them through a home-delivery network Orozco likens to “DoorDash since the ’80s.”

That reflects the makeup of the Dominican diaspora, which is concentrated in the U.S. The fact that the country’s economy is not over-reliant on remittances also helps soften the tax impact. The inflows are worth close to 10% of GDP, Orozco says — 9% in 2024, according to World Bank data — but the country relies on a “much more dynamic” export-manufacturing base than its CAFTA trade partners.

Related: Dominican Republic Tourism Surges

Still, that 1% tax means a lot less cash coming into the country. The loss will total $230.7 million in 2026, according to Helen Dempster, co-director of the Migration and Displacement Program at the Center for Global Development (CGD), a Washington-based think tank. The CGD’s dataset “suggests the Dominican Republic is among the countries most exposed to the U.S. remittance tax,” she added.

However, Orozco’s own survey found that among migrants who send cash, the majority intend to continue doing so and absorb the tax rather than switch. “The impact is on the income of the cash sender,” he says. He ties the levy to the politics of the law that produced it. “It’s part of a broader political agenda aimed at migrant practices the administration deems unacceptable.”

Solly Boussidan is a contributing writer based in Brazil.