To use a football analogy, the European Commission went in studs up with its ruling yesterday on Apple's tax affairs in Ireland.

The Government has been ordered to recoup up to €13 billion in unpaid taxes, plus interest, on the basis that Apple had been given selective treatment by Ireland through two tax rulings in 1991 and 2007.

This was a landmark decision by the commission, and the potential bill is a multiple of what had been expected by the Irish authorities and tax experts here.

According to the commission, the arrangement allowed Apple to avoid taxation on almost all profits generated by sales of its products in the EU single market, because Apple recorded the sales in Ireland rather than where the products were sold.

This was achieved by funnelling sales through a "so-called" head office in Ireland with "no employees, no premises and no real activities," said commissioner Margrethe Vestager. Its activities consisted solely of occasional board meetings.

Head office profits

Only a fraction of the profits of Apple Sales International (an Irish-registered company) were allocated to its Irish branch and subject to tax here. The “remaining vast majority of profits were allocated to the ‘head office’, where they remained untaxed”, according to the commission.

In effect, this money was paid to Apple in the US to fund research and development.

In 2011, according to figures released at US Senate public hearings, Apple Sales International recorded profits of $22 billion (€16 billion). But under the terms of the tax ruling, only about €50 million were considered taxable in Ireland, leaving the balance of profits untaxed.

As a result, Apple Sales International paid less than €10 million of corporate tax in Ireland in 2011 – an effective rate of about 0.05 per cent on its overall annual profits.

“In subsequent years, Apple Sales International’s recorded profits continued to increase but the profits considered taxable in Ireland under the terms of the tax ruling did not,” said Vestager. “Thus this effective tax rate decreased further to only 0.005 per cent in 2014.”

This, obviously, not the standard corporation tax rate of 12.5 per cent that has been in place in Ireland since January 1st, 2003.

This “artificial internal allocation of profits” was endorsed by the authorities here but had “no factual or economic justification” and amounted to State aid, the commission decided following a three-year investigation.

This tax ruling here was terminated when Apple Sales International and Apple Operations Europe (another Irish entity used by the maker of iPhones and iPads) changed their structures in 2015, which might help to explain that 49 per cent spike in our corporation tax receipts last year, to just under €6.9 billion.

Apple said it would appeal the ruling and that it was confident the decision would be overturned.

The Minister for Finance, Michael Noonan, will seek approval at an emergency Cabinet meeting on Wednesday to appeal the decision to the European courts.

Public opinion

Ireland has two months and 10 days to bring an appeal. By all accounts, Noonan wants to press the button immediately rather than chance other Ministers having their heads turned by public opinion or sniping from the Opposition.

"I disagree profoundly with the commission's decision," Noonan said. "Our tax system is founded on the strict application of the law, as enacted by the Oireachtas, without exception."

In other circumstances, the Government would grab with both hands the opportunity to collect €13 billion in back taxes.

But such is the importance of foreign direct investment to the Irish economy that it doesn’t want to scare off existing or potential investors at a time when our recovery is still delicately poised. And it doesn’t want to give oxygen to calls from other member states for a harmonisation of corporate tax rates.

Both the Revenue Commissioners and the IDA were quick to issue statements in support of the positions taken by Apple and the Government.

Apple and Ireland might well be proved right in their assertions that the tax paid by the tech giant complied with the relevant tax laws, both here and in its home country.

But that really just makes the law, whether in Ireland, the US or elsewhere, an ass. How could such vast sums of money not be subject to tax somewhere in the world?

At a press conference to explain the commission ruling, Vestager made a common-sense point about Apple arrangements.

“I would have the feeling, if my effective tax rate would be 0.05 per cent falling to 0.005 per cent, I would have felt that maybe I should have a second look at my tax bill,” she said to much sniggering among the press corps.

She’s got a point. By accident or design, this was a sweetheart deal for Apple, the like of which wasn’t available to Irish SMEs or ordinary taxpayers.

Whether or not the arrangement was legal, it wasn’t fair to other taxpayers, be they Irish or American.

Twitter: @CiaranHancock1