The Irish government, however, hasn’t collected a lot of tax on all that value added. As Coffey points out, a large part of the increase -- more than 30 billion euros -- was used to cover the depreciation of assets, possibly the same patents that multinationals moved to Ireland.
The same happens in another industry that has increasingly used Ireland as a base -- aircraft leasing. Companies lease their fleets in Ireland for tax purposes, but the revenue from the leasing is used to cover depreciation. Coffey noted:
So we have a large increase in gross value added but this doesn’t fully feed through to increases in wages and/or profits. Non-agricultural wages and salaries rose from 67.7 billion euros in 2014 to 71.5 billion euros in 2015.
In other words, the Irish aren’t really much richer and the government isn’t awash in tax money. Its ability to borrow gets a boost, though, so Noonan, who only moved against the Double Irish under pressure from the EU and the U.S., is happy. It’s also a relief to the Irish government that the multinationals haven't taken flight.
Ireland is a relatively small economy, so a single tax change can turn it into a growth leader overnight. It’s utterly meaningless to turn it into a poster child for austerity or export-led growth because its data -- including those on exports and imports -- can be distorted by the tax planning of a few foreign corporate behemoths. Sure, it had some underlying growth -- probably high for the euro area, at more than 5 percent in 2015 -- but that wouldn’t be easy to calculate without knowing the exact effect of intangible assets being moved to the country.
The Irish case is a cautionary tale for economists who like to discuss economic growth as a measure of policy makers’ success. Even in bigger countries, the methods used to assess the economy’s size are imperfect. They don’t always reflect increases or drops in a nation’s actual wealth or in its bona fide economic activities. The economies of many countries are grossly underestimated because of their large shadow sectors. Others -- such as Ireland’s in 2015 -- can be unintentionally inflated. Numbers lie, even when compiled with the best of intentions. Measures such as happiness may better describe the effect of economic policies than traditional GDP numbers.
Leonid Bershidsky is a Bloomberg View columnist. He is a Berlin-based writer, author of three novels and two nonfiction books.