A 1-percent tax on remittances from the United States is expected to have minimal effects in developing Asia, including the Philippines, the Asian Development Bank (ADB) said in its latest report.
“The Philippines is projected to face the largest proportional decline [in Asia], with US remittance inflows falling by the equivalent of 0.05 percent of GDP [gross domestic product],” the ADB said.
The tax was included in the One Big Beautiful Bill Act, enacted on July 4, 2025, and effective Jan. 1, 2026. The tax will shift part of the tax burden to immigrants and will be collected by physical and online money transfer service providers. Transfers through US. banks and using US-issued debit or credit cards will be exempt.
“The final rate of 1 percent adopted by the US Congress is much lower than the originally proposed 5 percent. As a result, the impact on remittances flows to Asia and the Pacific is projected to be very modest,” according to the Asian Development Outlook July 2025.
The US is a key source of remittances for economies in the region. In 2021, the last year with bilateral data available, US remittances to the region totaled $61 billion, about 30 percent of the total received. For four countries in the region – Tonga, the Marshall Islands, Vietnam and the Republic of Korea – the US was the main source, accounting for more than 40 percent of remittances received.
India received the largest absolute amount with about $16 billion, followed by the Philippines and the People’s Republic of China, both receiving $13 billion.
In relative terms, US remittances are most critical for economies in the Pacific, where they were equivalent to 16.5 percent of GDP in Tonga in 2021, 11.7 percent in the Marshall Islands, and 6.6 percent in Samoa.
The impact of the tax will be limited, even in the most affected Pacific Island economies. Tonga will be hardest hit, but even there, the estimated decline of inflows only amounts to 0.31 percent of its 2026 GDP.
The Marshall Islands’ projected loss is slightly lower, at 0.22 percent of GDP, while Samoa (0.10 percent) and Fiji (0.03 percent) would also be marginally affected.
Though the impact may be small from a macroeconomic perspective, low-income households that rely on remittances are likely to be disproportionately affected by these losses, the ADB said.
Economies outside of the Pacific will barely feel the tax. In the rest of the region, the Philippines is projected to face the largest proportional decline, with US remittance inflows falling by the equivalent of 0.05 percent of GDP, followed by Vietnam and Nepal (both 0.03 percent).
India’s loss would be the largest in absolute terms, at $315 million, but amounting to just 0.01 percent of its GDP.
“Senders’ ability to circumvent the tax will further curtail its impact,” the ADB report said.
It said remittance service providers may absorb part or all of the tax to remain competitive against US banks, which are exempt. This would primarily hit the profit margins of money transfer services such as Western Union, PayPal or MoneyGram, all US companies.
“And if transfer costs do rise, users may turn even more to the banking system to transfer money. Users may also rely more on informal methods such as physical cash transfer or the hawala system – a trust-based network where brokers settle transactions informally. Lastly, the tax could accelerate the shift toward cryptocurrency transfers, which are quickly gaining ground,” the ADB said.
