Dollars Flow into Dominican Republic Economy
The Dominican Republic, a country with a more diversified economy than most Caribbean nations, received a record $11.87 billion in remittances last year, up 10.3% from 2024, according to the Central Bank of the Dominican Republic.
Foreign remittances still reach four in 10 households in the country, making them a significant source of income.
Last year’s remittances were a banner year for the country, but as of January 1, a 1% tax on remittances paid by cash, money orders, or cashier’s checks was levied by Washington under the One Big Beautiful Bill Act.
The tax has heightened anxiety in migrant communities.
The Central Bank of the Dominican Republic forecasts a mild impact on the country, with remittance growth slowing to 3.5% in 2026, or roughly $12.2 billion.
Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue, broadly agrees with this forecast, though for reasons rooted less in the tax than in how Dominicans send money.
“My estimate is about 4% growth this year,” Orozco says. “I wouldn’t argue that the slowdown is due to the 1% tax, but rather to the precautionary fear factor.”
Early data supports Orozco’s analysis, with Patricia Krause, economist for Latin America at Coface, noting that the levy has yet to leave a mark on remittance figures.
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Remittances reached $4.1 billion in the first four months of 2026, up 4% year over year, and the increase was 11% year over year in April.
Orozco’s analysis also shows that remittances across all of Latin America and the Caribbean are projected to grow by 4.7% in 2026, a growth rate that is down from 6.3% the previous year.
This indicates that the slowdown is regional rather than Dominican, he says.
The reason the tax has landed softly thus far is the taxing mechanism, which applies only to transfers funded with physical cash or paper instruments, not to those paid from a bank account or card.
Most Dominicans in the U.S. are able to avoid the tax, as more than 80% of them hold a bank account, and 60% were already sending money digitally before the tax arrived.
“Instead of using cash, they may just use their debit card and avoid the charges,” Orozco says.
Ninety-nine percent of money transfers originate through licensed companies like Western Union, and many of those senders also hold a bank account.
The loss from the 1% tax will total $230.7 million in 2026, according to Helen Dempster, co-director of the Migration and Displacement Program at the Center for Global Development.
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The Center for Global Development’s dataset suggests the Dominican Republic is among the countries most exposed to the U.S. remittance tax, she added.
Orozco’s own survey found that among migrants who send cash, the majority intend to continue doing so and absorb the tax rather than switch.
“The impact is on the income of the cash sender,” he says, tying the levy to the politics of the law that produced it.
The country’s economy is not over-reliant on remittances, which are worth close to 10% of GDP.
It relies on a much more dynamic export-manufacturing base than its CAFTA trade partners.
As the situation continues to unfold, the flow of remittances to the Dominican Republic will remain a vital source of income for many households, despite the new tax.
Remittances play a significant role in the country’s economy.
