Trade war tactics, Part 9: Taxing remittances to make effective tariffs

Trade war tactics, Part 9: Taxing remittances to make effective tariffs.

by tonytran2015 (Melbourne, Australia).

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(Blog No. 1xx).

The engagement in the trade war between two opponents countries relies mostly on tariffs. The remittances sent home by immigrants can actually weaken the effect of tariffs. Taxing the remittances is a logical way to extend the effect of tariffs.

#trade war, #tariff, #remittance, #tax

1. Remittances sent home by immigrants.

Every years immigrants sent home remittances to help their relatives still in their poor original (third) countries. These remittances may be used by their relatives to live in some third country V. There (in country V) the cheapest goods may be bought, resulting in remittances from country A can be used to buy goods manufactured by its opponent (country C).

If the remittances sent home by immigrants in country A is significant then the currency from country A still support the export of its opponent (country C).

2. Taxing remittances to make tariffs more effective.

Immigrants may not like it [1,2,3] but taxing of those remittances may be necessary. It is reasonable for country A to tax the remittances leaving its soil. It is quite reasonable if the tax is reimbursed to the payees when their relatives can produce proof that they used that money to purchase solely goods exported from country A with proof of TRACEABILITY.

3. Numerical example.

Immigrants from country V come to A and work there. The immigrants send back to country V an amount of $100,000. Country A should make a tax of $10,000 on that remittance, so that only $90,000 leave the the soil of country A.

If the immigrants can give the proof that all the money had been spent in country V  to purchase goods which had been imported from A or made in A then the immigrants can get back their $10,000 tax. Therefore the immigrants had sent $90,000 remittances to their country V with NO tax.

In effect, this tax would make people in country V buy $90,000 of goods imported or made in country A. The money would not be spent on goods made by the opponent country C.

References:

[1]. https://transferwise.com/us/blog/foreign-remittance-meaning-taxes

[2]. https://blogs.worldbank.org/peoplemove/why-taxing-remittances-bad-idea

[3]. https://ourworld.unu.edu/en/why-funding-a-us-mexico-wall-with-a-remittance-tax-is-a-recipe-for-disaster

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