According to the latest national accounts, Ireland’s economy grew by a staggering 26.3 percent between 2014-2015. Exports are up 34 percent; investment is up 27 percent; and imports are up 22 percent. Per capita income per person, in employment, has increased from a whopping €88,000 ($98,000) in 2010 to €130,000 in 2015.

If Ireland continued to grow at this same rate every year, its economy would be bigger than China‘s by 2037.

Obviously, that isn’t going to happen. Ireland’s sensational growth rate tells us more about the problems of measuring gross domestic product (GDP) in a world of footloose capital than about how the Irish economy is doing. The nationally reported numbers reflect the real Irish economy about as well as Pokémon Go reflects real world geography. There’s some relationship, but strange fictional creatures keep on popping up where you least expect them.

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How multinationals avoid taxes

The problem is that Irish economic figures are distorted by the tax avoidance strategies of a few large multinationals. Most of the remarkable-seeming 26.3 percent growth figure comes primarily from an increase in Gross Fixed Capital Formation (GFCF). This is underpinned by a rapid growth in what are called “intangible assets” (a word that should cause even non-economists to raise an eyebrow) and “machinery and equipment” (capital stock). These spikes in “intangible assets” and “capital stock” reflect three corporate tax avoidance strategies that are attractive to multinational corporations.

1. Transferring capital assets. On Jan. 1, 2016, new legislation came into effect in Ireland, creating what’s called the “Knowledge Development Box” (internationally, this is usually referred to as the “Patent Box”). This legislation was the first of its kind, and is supposed to ensure that Ireland is living up to new OECD (Organization for Economic Cooperation and Development) regulatory standards, as set out in the OECD’s “Base Erosion and Profit Shifting Project” (BEPS). The new legislation applied a reduced tax rate on profits related to “intangible assets,” such as intellectual property (IP), which have resulted from research and development activities.

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Since January, many global firms have started taking advantage of Ireland’s KDB, and transferring their balance sheets (capital assets) and IP patents into Ireland to minimize their taxes. In the pharmaceuticals sector, it is reasonable to infer that tax inversion deals probably account for the huge rise in “intangible assets.” (Tax inversion is basically financial engineering. A large company buys a smaller company in a jurisdiction with lower corporate taxes. It then reincorporates its headquarters in the country with lower taxes. This is what some U.S.-based pharmaceuticals companies have been doing in Ireland.)

Remarkably, tax inversion now appears as investment in “research and development” on the nation’s balance sheet. While there can be no doubt that U.S. firms have a real presence in Ireland, these new “intangible assets” are unlikely to affect the real Irish economy or employment growth. As Paul Krugman notes, they simply shouldn’t be recorded in GDP.

2. Airline leasing. Global airline companies are effectively transferring their financial activities (their leasing contracts) into Ireland for tax purposes. This has little relationship to the actual physical stock of airplanes in Ireland. If you went looking for the planes, you wouldn’t find them on Irish territory. Rather, aircraft leasing and aviation finance companies are transferring their multibillion balance sheets into Dublin, which is then turning up as a growth in capital stock in Ireland’s international investment position.

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The former governor of the Irish Central Bank has argued that this all means that it is increasingly difficult to distinguish between a financial and nonfinancial firm. National statistics have simply not kept pace with the reality that large multinationals, while legally based in a single jurisdiction, move their capital assets all around the world. For example, it has been estimated that one aviation finance company transferred an estimated €39 billion into Ireland in 2015, saving the company €200 million in tax. The income earned from these companies’ leasing contracts is then accrued to Ireland in the form of a management fee. But the only people likely to benefit from this investment “growth” on the nation’s balance sheet are the brokers who sealed the deals.

3. What’s called “contract manufacturing.” This is when a global multinational books its overseas transactions in Ireland for tax purposes. The actual production of the product (and therefore the paid labor) might take place, for example, in the Baltic States, but the contracts themselves (and therefore the increases in the capital assets) are in Ireland.

It’s pure financial alchemy.

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In sum, Ireland’s ostensible growth is really a sign that it increasingly looks like a global corporate tax loophole for a handful of U.S. firms.

The 26.3 percent growth figure is meaningless. The national accounts don’t reveal real economic growth. Instead, they reveal Ireland’s central role in helping global companies avoid taxes.

This might sounds great for Ireland, but it actually may not be. These unbelievable figures undermine the real Foreign Direct Investment-led export growth model that underpins the Irish economy. It undermines the real presence of U.S. companies, for example, in the Internet-tech sector. The Irish debt-to-GDP ratio has now been reduced to about 80 percent. The budget deficit has been significantly improved. Ireland will be asked to make bigger contributions to the E.U. budget.

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When the National Treasury Management Agency goes out to sell Irish bonds, it will be speaking to international markets with a national balance sheet that is based on Monopoly money. The fact that Ireland’s national accounts have no credibility should concern the Irish government and its eurozone partners.

Aidan Regan is an assistant professor at the School of Politics and International Relations, University College Dublin. Follow him @aidan_regan.

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