At the beginning of 2026, a new policy has thrown a wrench into the global remittance ecosystem. The new US legislation, Section 107, mandates a 1% tax on cross-border remittances through offline channels such as cash and money orders, with no minimum amount limit, collected directly by remittance service providers.

At first glance, it seems just 1%, but what does this mean for families relying on cross-border transfers?

The policy design is quite interesting — electronic bank transfers and credit card payments are fully exempt, focusing specifically on cash remittances. The question is: in the US immigrant community, cash remittances account for as much as 63%. Low-income immigrants without bank accounts or who face language barriers can only use traditional channels like Western Union and MoneyGram. Mr. Li sends $2,000 monthly to his parents in China; with an original fee of nearly 6%, plus this new 1% tax, he pays an extra $240 a year — which is a small part of a month's rent in New York. The same story plays out worldwide: Javier in Mexico sends $300 monthly to his family in Honduras; after taxes, he loses $3, and his children's extracurricular classes are directly affected.

The data is particularly striking: remitters with annual incomes below $30,000 bear 78% of the tax burden, while high-income groups account for only 3%. Isn’t this a clear transfer of wealth?

For the economies of recipient countries, this 1% could be the last straw that breaks the camel’s back. In regions like Central America and Southeast Asia, remittance income can account for 20%-30% of GDP. A seemingly moderate tax rate could be devastating for ordinary local families.