In 1980, a 25-year-old university dropout named Steve Jobs turned up in the Irish city of Cork with a plan.

He was going to revolutionize the world with mini personal computers that could store things like recipes or doctor's notes. In a few years, he told a newspaper reporter at the time, they would drop significantly in cost and change the way we live.

SEE ALSO:Read Tim Cook's open letter to Europe after tax ruling

It took a little longer for us all to be holding personal devices, but he wasn't wrong. The article was published on Dec. 23, 1980 and with a small amount of skepticism it spoke of the man who brought a $7 million investment and 700 jobs to Cork.

It was Apple's first move into Europe, long before the world had heard of the iPhone and five years before Jobs was basically kicked out of his own company. The late founder went on to make a triumphant return as the savior of the technology company in 1997.

Today, Cork is at the center of a tax debate involving Apple and the Irish government. In 1991, Apple struck what is being called a "sweetheart deal" with the government.

It would allow Apple to pay taxes way below the corporate tax rate in Ireland of 12.5 percent. Instead, the company's tax rate would be set in the low single digits, sometimes dipping even lower, and eventually earn the ire of the European Union (EU).

The European Union slams Apple's tax practices

Apple's tax arrangement in Ireland has been the subject of scrutiny for some time. The company was the focus of a hearing in the U.S. in 2013 that looked into the convoluted and murky tax practices of Apple in Ireland.

It found there was a web of subsidiaries set up in Ireland in a strategic attempt to reduce the tax it pays — with the tax rate sometimes as low as 0.05 percent. It also noted that Ireland "essentially functioned as a tax haven for Apple."

Credit: EUropean union

Apple, though, has been transparent about its dealings in Ireland.

"Since the early 1990s, the Government of Ireland has calculated Apple’s taxable income in such a way as to produce an effective rate in the low single digits …. The rate has varied from year to year, but since 2003 has been 2% or less," the company told the U.S. hearing.

The company claims its tax practices are above board and commonly used by global companies, but on Monday, the EU decided otherwise and ruled the government of Ireland provided "illegal state aid," which is essentially making a deal with a company that benefits it in an unfair way.

The ruling means Apple may have to pay up to €13 billion ($14.5 billion), which is the amount of taxes it owes from 2003 to 2014 plus interest. This decision will be appealed by Apple, with its impressive team of lawyers and by the Irish government. Ireland doesn't want the money the EU is requesting, but rather would like to keep good relations with Apple.

Apple's current CEO Tim Cook wrote an open letter following the decision making it clear Apple follows the law and has pays all taxes it owes.

"Over the years, we received guidance from Irish tax authorities on how to comply correctly with Irish tax law — the same kind of guidance available to any company doing business there," he wrote. "[The EU's] claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals."

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Ireland's minister for finance, Michael Noonan, has said numerous times that the government will use every legal avenue to defend itself against the EU's finding. He also commented in 2014 that the Irish tax system and low tax rate has always been transparent.

"We do not hide it, in fact, we broadcast this rate as the defining element of our corporate taxation system," Noonan said. "The Irish tax regime is fully transparent as our rules are clearly laid down in statute."

What was the sweetheart deal?

Ireland is accused of allowing the company to shift profits from two European subsidiaries into a "head office" that paid an extremely low tax rate.

That "head office" subsidiary also really doesn't seem to do anything besides receive profits from other Apple subsidiaries. "This 'head office' was not based in any country and did not have any employees or own premises," the EU noted.

Major companies often operate through a large number of smaller parts known as subsidiaries. These pieces can be based just about anywhere regardless of where the parent company is headquartered. Apple operates numerous subsidiaries in Ireland that are technically the ones selling iPhones and computers throughout much of the European continent.

The EU is claiming that those subsidiaries funneled the profits they made up to another subsidiary and that Apple did this to boost profits. That subsidiary was taxed at an extremely low rate.

The EU concluded Monday that Ireland helping Apple to reduce its tax rate in this way amounted to illegal state aid in the form of a "sweetheart deal" because Apple received preferential treatment.

"Following an in-depth state aid investigation launched in June 2014, the European Commission has concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991," the EU ruled.

The first tax ruling by Ireland occurred in 1991 and then was followed by an update in 2007. The deals, according to a release by the EU on Tuesday, related to two subsidiaries of Apple that were set up in Ireland: Apple Sales International (ASI) and its parent company Apple Operations Europe (AOE).

To put it in perspective: Apple Sales International had an income of $74 billion between 2009 and 2012. Yet, it has paid little or no taxes to any government on that $74 billion and claims it isn't a tax resident anywhere.

Here, have a graph:

Credit: FINFACTS / U.S. Subcommittee

The subsidiaries have their mailing address in Cork, Ireland but are not considered "tax residents" of Ireland. They are also not considered "tax residents" of the U.S., which means they are conceivably floating around somewhere in the middle of the Atlantic Ocean.

"Only a small percentage of Apple Sales International's profits were taxed in Ireland, and the rest was taxed nowhere," the EU noted Monday.

It is a murky, murky world of foreign tax law.

Why would Ireland strike such a deal?

According to extracts of meetings in 1990 and 1991 as reported by the Financial Times, Apple made note of its impact on the region of Cork, urging the Irish government to do a deal.

"...[the tax adviser’s employee representing Apple] mentioned by way of background information that Apple was now the largest employer in the Cork area with 1,000 direct employees and 500 persons engaged on a subcontract basis. It was stated that the company is at present reviewing its worldwide operations and wishes to establish a profit margin on its Irish operations," the extract read.

A man reads the evening newspaper with Apple in the headline in Cork, Ireland in 2014.Credit: AFP/Getty Images

It also noted that only a third of the company's business — manufacturing — was relevant to Ireland, insinuating that the company should be able to shift two-thirds of its profits through the Irish companies with a tiny tax rate. Ireland agreed.

There is no doubt that Apple had a big impact on the region and the Irish government wanted big corporations to continue to set up in the country. Today, more than 40 multinational companies including Amazon and Google are based in the Cork area, according to the Guardian.

Since that time, Apple became the company it is today — with the release of the iPhone, iPad and the MacBook — and these tax deals were looked at more thoroughly. Despite all this, Apple seems to still be Ireland's sweetheart, with the government backing the company despite the EU's ruling.

Credit: mashable

Correction: The original story stated Steve Jobs was a college graduate instead of a college dropout. He dropped out of his studies at Reed College in Portland, Oregon after the first semester.

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