India leads in remittances - but Trump's tax could deal a blow
To be sure, there's still some confusion surrounding the tax, and final approval is pending Senate action and the President's signature.
"The tax applies to all non-citizens and even embassy and UN/World Bank staff. But those who pay taxes can claim a tax credit. Thus, the remittance tax would apply only to those migrants who do not pay taxes. That would mostly include unauthorised migrants (and diplomats)," Dilip Ratha, the World Bank lead economist for migration and remittances, told the BBC.
Dr Ratha wrote in a note on LinkedIn that migrants would try to cut remittance costs by turning to informal methods - hand-carrying cash, sending money through friends, couriers, bus drivers or airline staff, arranging local currency payouts via friends in the US, or using hawala, hundi and cryptocurrencies.
"Will the proposed tax deter unauthorised immigration to the US? Will it encourage unauthorised migrants to return home?" wonders Dr Ratha.
Not quite, he says. A minimum wage job in the US earns over $24,000 a year - roughly four to 30 times more than in many developing countries. Migrants typically send home between $1,800 and $48,000 annually, estimates Dr Ratha.
"A 3.5% tax is unlikely to deter these remittances. After all the main motivation for migration - migrants trying to cross oceans and rivers and mountains - is to send money home to help helpless family members."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
an hour ago
- Reuters
India's stock benchmarks to open flat on caution ahead of US tariff deadline
July 7 (Reuters) - India's equity benchmarks are poised to open little changed on Monday, as caution prevailed among investors ahead of the upcoming U.S. tariff deadline. The Gift Nifty futures were trading at 25,535 points as of 7:58 a.m. IST, indicating that the Nifty 50 (.NSEI), opens new tab will open near its previous close of 25,461. Asian shares opened lower after U.S. officials flagged a delay in upcoming tariffs but offered no clarity or formal documentation, leaving investors uncertain about the scope of the change. The U.S. is close to finalising trade agreements with several countries and will notify other countries of higher tariff rates by July 9, President Donald Trump said on Sunday. The new rates are set to take effect from August 1. Both the Nifty and Sensex fell 0.7% each last week. "Investors have adopted a wait-and-watch approach and have turned cautious ahead of the July 9 tariff deadline," said Vinod Nair, head of research at Geojit Financial Services. Foreign institutional investors (FII) remained net sellers of Indian stocks for the fifth straight session while domestic investors snapped a four-session buying streak on Friday. Analysts say a favourable trade deal and strong June quarter earnings could lift indexes to record highs, while disappointments on either front could pressure markets. Both the Nifty and Sensex remain about 3% below their all-time highs hit on September 27, 2024. ** Consumer firms Dabur India ( opens new tab and Godrej Consumer ( opens new tab flag June quarter profit pressures ** IndusInd Bank ( opens new tab says net advances fell 3.9% year-on-year in June quarter ** Bank of India ( opens new tab says global deposits rose 9.1% year-on-year in the June quarter while gross advances rose 12%
Reuters
2 hours ago
- Reuters
Bubble tea giant embodies Starbucks' China dilemma
HONG KONG, July 7 (Reuters Breakingviews) - Fast-food provider Mixue's ( opens new tab success is adding a bitter taste to Starbucks' (SBUX.O), opens new tab attempts to sell a stake in its business in the People's Republic. The Chinese company has grown into the world's biggest food and beverage chain by selling sub-$1 drinks and adapting quickly as domestic consumers spend less. That's hard for the $107 billion premium-brand U.S. coffee icon to compete with. Both Mixue and Starbucks opened their first stores in China in 1999. For the latter the challenge was to introduce coffee culture to a nation obsessed with tea. This turned out to be a smooth blend. Chinese consumers have become more picky and cost-conscious of late, though, and the Seattle-based heavyweight's market share has dropped to 14% from 34% in 2019, per market data provider Euromonitor. Starbucks is trying to fight back. It announced its first-ever price cut in China last month, although its offerings are still far more expensive than those from Mixue and other rivals like Luckin Coffee. But Starbucks cannot compete on pricing alone. Its problems run deeper than that. Amid all the talks about China's weak consumer demand, some of the best-performing stocks in the past year have been the so-called new consumption, opens new tab plays, which include trendy toy maker Pop Mart International ( opens new tab and handcraft jewellery retailer Laopu Gold ( opens new tab. These are brands that resonate deeply with the shifting spending preferences of young Chinese to focus on intangibles such as convenience, experience or personalization. Mixue's robust supply chain, for instance, allows it to reduce costs and introduce new beverages – or even new interior designs – to its more than 45,000 outlets within weeks. The same process may take much longer for Starbucks' 7,800 stores in China. And a similar strategy caused problems at its U.S. stores in the past. Boss Brian Niccol even told shareholders in March that Starbucks can learn from "several lessons" in its China supply chain and improve its North American business. Shareholders have rewarded Mixue's strategy: its market value has soared almost 80% to some $25 billion since its Hong Kong listing in March. Starbucks China, meanwhile, may be worth several billion dollars, Bloomberg reported in May, citing sources. Its same-store sales have at least levelled off recently, halting the earlier slump. And Niccol has emphasised the need to find ways to grow, opens new tab. That would seem to require having a local partner - and buyer - with a Mixue-style understanding of how to take advantage of China's new consumer logic.
Reuters
3 hours ago
- Reuters
Trade deal developments to drive Indian rupee; bond yields to track Treasuries
MUMBAI, July 7 (Reuters) - Indian rupee traders will monitor trade talks with the U.S. this week, ahead of a July 9 deadline for making deals with the world's largest economy, while government bond yields will likely be range-bound with focus on movement in Treasury yields. The rupee closed at 85.3925 on Friday, with little change over the week. Traders reckon that a U.S.-India trade agreement would be a boost for the South Asian country, but it is unlikely to spark a sharp rally. "If the treaty happens, the rupee may see some more upside while the RBI (Reserve Bank of India) may not be very comfortable with a fast appreciation of the rupee," said Anil Bhansali, head of treasury at Finrex Treasury Advisor. He pegged the near-term resistance for the local currency at around 85. The rupee's very near-term implied volatility has remained muted despite the uncertainty, reflecting market expectations of a range-bound movement. The U.S. is close to clinching several trade deals ahead of the July 9 deadline, Treasury Secretary Scott Bessent said on Sunday. Meanwhile, data released on Friday showed that India's foreign exchange reserves rose to $702.8 billion, as of June 27, in touching distance of an all-time high hit last year. The dollar continues to trend downwards, with scaled-back wagers on rate cuts by the Fed prompting only fleeting gains last week. U.S. consumer inflation data due on Tuesday, followed by retail sales data on Thursday, will also be in focus to gauge the future path of benchmark policy rates. Meanwhile, India's 10-year benchmark 6.33% 2035 bond yield ended at 6.2947% on Friday, barely changed for the week. Traders expect it to move in a range of 6.28% to 6.33% this week. Bond market participants would remain focused on the movement in U.S. Treasury yields this week, especially after strong jobs data reduced hopes for Fed rate cuts. "Tariffs and other geopolitical uncertainties may contribute to market volatility in the short term, but taking into consideration the modest growth expectations, with the current trend of inflation, there may be scope for monetary easing," said Parijat Agrawal, head of fixed income at Union Asset Management. Traders will also watch whether the recent surge in foreign inflows into Indian bonds continues, with investors having net bought over $1 billion of government bonds last week. Also on the radar is the RBI's next move, after it did not raise the quantum of liquidity withdrawal from the banking system despite surplus hitting a three-year high on Friday. The central bank's gradual approach for variable rate reverse repos (VRRRs) is likely to keep the overnight interbank lending rates between the policy repo rate and the floor of the corridor, allowing some policy transmission, traders said. KEY EVENTS: ** U.S. initial weekly jobless claims for week to June 30 - July 10, Thursday (6:00 p.m. IST)
