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Trump to take Sh17bn from Kenya's diaspora cash
More than 100,000 Kenyans working and living in the US are the largest source of remittances into Kenya, and accounted for 53.17 percent of $4.945 billion flows in 2024.
US President Donald Trump’s administration has set its sights on taking away five percent of the hundreds of billions of shillings that Kenyans working and living in America send back home annually through a proposed law experts have described as “weird”.
A new draft Bill by Republicans is seeking to slap a five percent excise tax on remittances, or international money transfers, by immigrant workers, including holders of green cards and those with temporary work visas.
More than 100,000 Kenyans working and living in the US are the largest source of remittances into Kenya, and accounted for 53.17 percent of $4.945 billion flows last year.
Diaspora remittances from the world’s largest economy amounted to $2.63 billion (about Sh339.17 billion) last year, according to data from the Central Bank of Kenya (CBK).
This means the Trump administration will take about $131.46 million (about Sh16.96 billion) in remittance excise tax from Kenyan will remain constant.
The House Republicans have exempted US citizens from the tax, which has been included in the ‘One Big Beautiful Bill’—Mr Trump’s priority bill.
“There is hereby imposed on any remittance transfer a tax equal to 5.0 percent of the amount of such transfer,” says the draft Bill. “The remittance transfer provider with respect to any remittance transfer shall collect the amount of tax.”
This means the tax will be collected at the time of transaction directly by banks and financial services.
Kenya Diaspora Alliance (KDA), the umbrella body for Kenyans in foreign countries, said the proposed law will raise the cost of sending money back home and goes against objectives of United Nations on facilitating migrants to participate in economic development.
“It is unfortunate and discriminatory. I haven’t heard anywhere where this happens,” Dr Shem Ochuodho, the global chairman of KDA and President of the Africa Diaspora Alliance, told the Business Daily.
“Five percent is quite high. It will go against the spirit of the UN Global Compact on Migration Objective 19 and 20, which talk about making it easier for migrants to send money back home and also reducing the cost.”
Objective 19 focuses on facilitating conducive conditions for migrants and diasporas to fully contribute to sustainable development in all countries, while objective 20 calls for promotion of faster, safer, and cheaper remittance transfers and fostering financial inclusion for migrants.
International tax experts said the proposed Bill goes against economic principles and canons of taxation by proposing to slap an excise tax on quantum of money transferred rather than the transfer fee.
“It does not seem to go with the economic principle of taxation because you are literally taking money as a good yet it is the service that you should be taxing. Ideally, the five percent should be on the charge or transfer fees, which is not the case when you look at the Bill. It beats the canons of a good tax system,” Hadijah Nannyomo, a partner for international trade and indirect taxes at EY, told the Business Daily.
‘It may result in increased cases of tax planning where people will start using people with US citizens to transfer the money. They are leaving it open to loopholes by making it that discriminatory.”
Reports indicated that the US House of Representatives aims to pass the Bill by end of this month, setting the stage for final signature and enforcement in July.
Findings of past studies, including CBK-commissioned Kenya Diaspora Remittances Survey Report of December 2021, have suggested that the largest share of the remittances goes into supporting families at home to buy food and household goods as well as pay medical bills and school fees.
Increased dollar inflows from Kenyans abroad has partly helped ease pressure on the shilling this year by supporting the supply side of the dollars against demand by importers shipping in goods as well as companies paying expatriates and dividends to foreigners.
