Mogadishu, Somalia – A newly approved remittance tax in the United States is raising alarm among Somali families and policymakers, who warn it could severely disrupt a critical economic lifeline for millions.
Under the “One Big Beautiful Bill,” the U.S. will begin imposing a 1% tax on all outgoing remittances starting January 2026, following Senate amendments passed this week.
For Somalia, where remittances account for up to 30% of GDP, the impact could be devastating. Every year, the Somali diaspora sends an estimated $1.3 to $1.6 billion to relatives and communities back home — funds that support education, food, health care, housing, and small businesses in a country still recovering from decades of conflict and instability.
The U.S. tax, paired with recent cuts in international aid, poses a dual threat to Somalia’s financial resilience, especially for vulnerable populations in urban slums, IDP camps, and rural areas affected by drought or insecurity.
“This tax risks pushing many Somali families deeper into poverty. For most households, monthly support from abroad is the only stable source of income. Even a small fee can mean less food or missed school fees,” said Ikran Warsame, a Mogadishu-based economist.
Remittance service providers, especially in diaspora hubs like Minneapolis, London, and Toronto, are also bracing for an expected dip in transfers, particularly low-value ones which will be disproportionately impacted by the tax.
Humanitarian organizations have expressed concern, warning that the tax could force families to rely more heavily on shrinking aid programs.
“Diaspora remittances have often filled the gap where aid could not reach,” said a senior official with a UN agency in Somalia. The official further warned that the new policy risks reversing years of progress.
Critics of the U.S. bill argue it unfairly targets immigrant communities, especially those from fragile states like Somalia, Ethiopia, Haiti, and South Sudan. Somali-American lawmakers and advocacy groups have vowed to push for exemptions or a rollback before the tax comes into effect.
As the countdown to January 2026 begins, Somali officials are calling for diplomatic engagement with Washington to protect remittance flows that millions depend on for daily survival.