Abinader and New Challenges Amid 5% Tariffs and Taxes on Remittances

New York: President Luis Abinader’s administration and the Dominican Republic’s economy are facing new challenges amid the possibility that the United States Congress may impose a 5% tax on remittances sent from the U.S., a proposal backed by specific sectors of the Republican Party. This potential tax burden, combined with a recent 10% increase in tariffs on imports from the Dominican Republic, effective April 5, poses a historic challenge to the country’s economic development and the president himself.

The United States remains the primary destination for the Dominican diaspora. According to figures from the Institute for Dominicans Abroad (INDEX), around 2.4 million Dominicans reside in the U.S., making them the fourth-largest Latino community in the country, after Mexicans, Puerto Ricans, and Cubans.

Remittances are a vital source of income for the Dominican Republic. According to the Central Bank (BCRD), the country received US$10.756 billion in remittances in 2024. In the first quarter of the year alone, it collected US$2.9628 billion, a 12.4% increase compared to the previous year’s period.

President Luis Abinader’s administration has sought to project economic stability in response to the international outlook. The monetary policy rate (TPM) has remained at 5.75%, and international reserves exceeded US$15 billion in April, representing 12% of the Gross Domestic Product (GDP). Additionally, the government managed to reverse an upward trend in the exchange rate: the dollar fell from RD$63.09 to RD$58.60, a 7.1% appreciation of the peso in just over a month.

Risks of the Remittance Tax

The proposed 5% tax on remittances currently under discussion in the U.S. Congress could have far-reaching adverse effects on the Dominican Republic. Among the most significant risks is a disincentive to send money through formal channels, as the new tax could push people toward informal means, decreasing officially recorded flows and undermining financial transparency. It would also result in declining domestic consumption, as remittances are a lifeline for thousands of families.

This would impact sectors such as retail, construction, and services, with profound social consequences, given that many remittance-receiving families live in vulnerable conditions. A reduction in these incomes could increase poverty and inequality in the country. There would also be pressure on the exchange rate, as a drop in foreign currency inflows could lead to higher demand for dollars, depreciating the peso and increasing the cost of imported goods, fueling inflation.

Faced with this outlook, various business and social sectors have begun to raise their voices. The National Council of Private Enterprise (CONEP) had previously expressed concern about U.S. trade policy, though assurances from monetary authorities helped ease uncertainty.

President Abinader and the country face a new challenge with the potential remittance tax on the table. However, with resilience, his leadership skills, and the support of an excellent economic team he has assembled, the nation may avoid compromising its social and financial stability. The Dominican government is expected to strengthen its diplomatic strategy and coordinate with other affected Latin American countries to protect the interests of their citizens abroad.