The true cost of gold - Lyla Latif
Gold is one of Earth’s most
valuable resources,
with one kilogram regularly valued
at over 55,000 US dollars.
In 2020, Mali produced an estimated
71.2 tons of gold.
But Mali only saw $850 million
from gold in 2020,
when that amount is worth billions,
not to mention that the country likely
produced much more
than the reported 71.2 tons.
The situation isn’t unique:
a number of other gold-rich countries
in Africa,
including Mauritania, Senegal, Guinea,
Cote d’Ivoire,
Ghana, Burkina Faso, and Niger
also aren’t seeing the income they should,
given the price of gold.
The force behind this is greed
on an individual, corporate,
and national scale,
and a corrupt system
that perpetuates itself.
Although Mali has abundant gold,
the country lacks the infrastructure
to mine and export it.
So the government allows multinational
corporations to apply for licenses
to mine gold in exchange
for taxes paid to Mali’s government.
These taxes should, theoretically,
finance development,
like building the infrastructure
to mine gold, improve the economy,
and provide citizens with public goods
like healthcare and education.
Tax money alone isn’t enough
to do these things, of course:
a government also has to be invested
in its people’s well-being,
and government corruption
can prevent progress.
But without adequate funds,
even the best intentioned government
doesn’t stand a chance
of improving circumstances
for its citizens.
Foreign corporations exploit
Mali’s need for tax revenue
to get the government to sign on to very
unfavorable yet perfectly legal contracts.
For example, one such contract stated
that no corporate taxes would be owed
for the first five years,
costing Mali millions in tax revenue.
Meanwhile, mining licenses sometimes allow
these corporations to take samples of gold
out of the country
without registering them
or paying taxes on them.
These should be small amounts of gold
used to test for quality,
but the license doesn’t limit
the size of samples,
so this creates a loophole
where corporations export large
amounts of gold without paying any tax.
The multinational corporations are
also evading taxes
they are legally required to pay.
They filter profits through a labyrinth
of tax havens that’s difficult to trace.
Or they exaggerate their expenses
so they end up owing very little in taxes.
For instance, a corporation in Mali uses
a subsidiary in Ireland
to manage its operations
and another subsidiary in the Netherlands
to license its brand name.
The corporation in Mali pays
management fees to the Irish subsidiary
and pays intellectual property license
fees to the Dutch company,
all for enormous sums.
These costs are deducted
from overall profits,
leaving the amount subject
to taxes at a bare minimum.
These companies also buy gold
on the black market.
Local, small-scale miners often operate
without a license,
so the government is unaware
of how much gold they mine.
Corporations buy gold from these miners,
avoiding the cost of mining
the gold themselves,
and pay the miners far below market value.
Then they turn around and tell
the government
they incurred huge expenses
mining gold they didn’t mine at all.
There’s no way for Mali’s revenue
authority to verify this information,
causing the country to lose
even more tax money.
Similarly, corporations pay corrupt
government officials
to help them smuggle gold across borders,
primarily to the United Arab Emirates,
rather than operating
through legal channels.
In 2016, Mali reported around $200 million
of exported gold,
but the UAE reported receiving slightly
over $1.5 billion of imported gold
from Mali that same year.
The gold is then sold to European,
American, and Asian markets from the UAE,
with no questions asked about its origins.
Similar patterns can be seen
with gold-rich countries across Africa,
indicating that gold smuggling
is happening on a massive scale,
without ever being subject to taxes.
All of this creates a vicious cycle,
forcing a continued reliance
on the corporations that helped create
the situation in the first place.
More than half of Mali’s citizens live
below the international poverty line,
while their nation’s wealth lines
the pockets of foreign corporations
and corrupt officials.
