Why remittances to poor countries should not be taxed

Remittances are private financial transfers from migrant workers back to their countries of origin. These are typically intra-household transfers from members of a family who have emigrated to those who have remained behind. The scale of such transfers throughout the world is very large, reaching $338 billion U.S. in 20081—several times the size of overseas development assistance (ODA) and larger even than foreign direct investment (FDI). The data on migration and remittances is too poor to warrant very firm conclusions about their effects—actual or potential—on poverty and development in poorer countries. We will however, present reasons that make it plausible to believe that remittances can contribute to poverty-reduction and promote development in poorer countries. Our main aim, however, is not to engage in detail with empirical debates about the effects of these transfers, but to establish moral grounds for favorable tax treatment on remittances on the assumption that they do have positive effects on receiving countries.