There is one fundamental truth which cannot be escaped from the Apple controversy: the company paid virtually no tax on vast tranches of its sales.

Non-payment of any tax in any country means public services are deprived of revenue which could be spent on schools, hospitals or social housing.

The row about Apple also spills over into Irish politics, the relationship between the EU and US and raises questions about the independence of sovereigns to determine their own tax affairs.

Apple spotted a gap in international tax arrangements and took advantage of it.

The decision of the European Commission is highly embarrassing for Ireland because Brussels has rejected the position put forward by the Irish authorities.

Europe decided the Revenue Commissioners should have charged Apple far more in tax than it did.

At the heart of the controversy are two of the company’s subsidiaries.

These firms were registered in Ireland but were controlled and managed in the US where they held their board meetings. But they did not have any employees or own any premises.

The companies were a logistics company called Apple Operations Europe and a sales operation called Apple Sales International.


Although they were registered in Ireland the two companies were stateless.

The Revenue Commissioners taxed the companies on the basis of their activities in Ireland. They left the other activities to be taxed elsewhere.

Sales in Ireland formed a small proportion of the two companies’ profits.

The real problem emerged when it became clear the activities outside Ireland were not taxed at all.

The finding by the European Commission says both companies should have been taxed by Ireland on the basis of their world-wide income.

This means that all the sales activities associated with the ground breaking iPhone will be attributed to Ireland.

The ruling applies to Apple’s activities from 2003 to 2014.

The Government asserts that Apple was not given a sweetheart deal. Instead the company was given two tax opinions one in 1991 and a second 2007. These opinions are no longer operative.

Two years ago in the budget the Government closed off a loophole called the Double Irish, which allowed stateless companies to be registered in Ireland.

The Irish authorities provided the Commission with ten years of Apple’s tax returns and a wealth of other information as part of the investigation.

Ironically, Ireland is now mandated to collect the money from Apple although the Government disputes whether it is entitled to it.

Over the next four months the Revenue Commissioners will have to make a final determination about the taxes owed by Apple and collect the money.

Brussels says that could be €13bn plus interest. According to accountancy group Grant Thornton that interest could amount to a further €6bn.

To complicate matters further, other countries can assert they are owed the money by Apple, which would reduce the €13bn figure due to Ireland. That could be a flaw in the judgment. Why is Ireland collecting the money if it is due to other countries?

It would be difficult for Ireland to spend the money while it is taking a court case with the aim of repaying the tax collected back to Apple.

That means the money is going to be managed by the National Treasury Management Agency on behalf of the State and held in an escrow account.

Even the prospect of a reasonable return on the money looks gloomy with interest rates on the floor.

The ramifications of the Apple controversy will be felt for years.

But its effect may be to throw a bucket of cold water over multinationals who have avoided paying their fair share of taxes around the globe.

Comment via Twitter: @davidmurphyRTE