RemitAid™: Remittance Tax Relief for International Development
RemitAid™ is a programme advocating Remittance Tax Relief (RTR) for International Development. It seeks to mitigate the imperfections of Diaspora and migrant remittances and to facilitate the channelling of more of these financial flows towards productive and regenerative ventures in developing countries. This would mean the provision of a community tax relief on remittances that are spent of activities that support the Millennium Development Goals (MDGs), charitable objectives or other sustainable development projects and programmes. The 'Introduction to RemitAid™' paper (which can be downloaded from this website) sets out a simple framework through which tax relief can be claimed and pooled together in a simple and transparent matter with minimal risk for fraud or impropriety. RemitAid™ was founded by Mr Gibril Faal (Director of GK Partners and Chairman of the African Foundation for Development [AFFORD).
It is proposed that RemitAid™ bodies are set up to claim and pool together the tax relief claimed. The tax rebate is not paid to individual remitters themselves - thus motivation and opportunity for fraud is minimised if not eliminated. The rebates are then pooled together in a fund - used to mitigate the negative effects of remittances. The funds can also be used to help reform the structure of the remittance sector such that a greater part of remittances are used for sustainable, regenerative and productive activities.
According to the World Bank, in 2005, remittances to developing countries sent through formal channels was about $167 billion. The total amount including sums send through informal means is estimated to be more than $250 billion. For many developing countries, the amounts received through Diaspora and migrant remittances is greater than both Foreign Direct Investments (FDI) and Official Development Assistance (ODA).
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However, the bulk of remittances is spent on consumption rather than direct economic and income generating activities. In the initial RemitAid™ analytical study, Gibril Faal reviewed the direct and indirect economic and social benefits of remittances and most importantly, identified the negative impacts and structural imperfections of remittances as a form of international development finance. Based on the understanding of the conceptual and practical causes of the shortcomings of remittances, the RemitAid™ idea was developed as a practical mechanism to mitigate the problems and enhance the positive impacts of this important form of development finance.