The United States faces a potential £380 billion tax revenue shortfall over the next decade as Trump's proposed immigration crackdown deters undocumented workers from filing tax returns, experts warn.
The looming crisis stems from plans to share data between the Internal Revenue Service and immigration authorities, coupled with increased raids by Immigration and Customs Enforcement. Tax experts say these measures could cost the US Treasury up to $479 billion as millions of undocumented workers abandon tax compliance to avoid deportation.
The policy creates a stark financial contradiction. Whilst stricter enforcement aims to control illegal immigration, it threatens to drain billions from a government that currently benefits from taxes paid by undocumented workers through income, sales, and property levies.
Tax advisers are particularly concerned about proposed changes to data-sharing protocols. The historic separation between tax collection and immigration enforcement has encouraged broad compliance, but eroding this firewall could trigger a "chilling effect" where fear of deportation overrides tax obligations.
For Britain, the implications extend beyond US borders. A weakened American fiscal position could ripple through global financial markets, potentially affecting UK investments and sterling's value against the dollar. However, direct impacts on British savers and mortgage holders are expected to remain minimal in the short term.
The Bank of England monitors such developments as part of its broader economic assessment, though this issue alone is unlikely to influence UK interest rate decisions unless it escalates into a major economic shock. British investors with FTSE 100 exposure to US markets may see indirect effects, though financial advisers stress the need for qualified guidance on investment decisions.