You want your multinational corporation to be seen as a goodcorporate citizen. But you also feel obliged to your company'sshareholders to keep it from paying a cent more in taxes than it isrequired to.

So, what's the dividing line beyond which responsible taxmanagement turns into poor citizenship? Well, for the moment itappears to be somewhere between this:

Apple set up their sales operations in Europe in such a way thatcustomers were contractually buying products from Apple SalesInternational in Ireland rather than from the shops thatphysically sold the products to customers. In this way Applerecorded all sales, and the profits stemming from these sales,directly in Ireland.

And this:

Under the agreed method, most profits were internally allocatedaway from Ireland to a “head office” within Apple SalesInternational. This “head office” was not based in any countryand did not have any employees or own premises. Its activitiesconsisted solely of occasional board meetings. Only a fraction ofthe profits of Apple Sales International were allocated toits Irish branch and subject to tax in Ireland. Theremaining vast majority of profits were allocated to the “headoffice,” where they remained untaxed.

Those passages are both from the news release issued Tuesday bythe European Commission announcing that it was ordering Apple topay 13 billion euros ($14.5 billion) in back taxes plusinterest.

The decision will surely be fought over for a while yet; U.S.officials have already been complaining that the European Union isunfairly targeting American companies in its tax crackdown. But itseems pretty clear that the devices used by U.S. tech giants toshift their European income not just to low-tax jurisdictions butto nonexistent ones are proving to be a step too far.

As a single market with a lot of different tax systems, Europealready provided ample opportunity for corporations with operationsin multiple countries to reduce their taxes. The initial setupdescribed above shifted Apple's income from big, relativelyhigh-tax markets such as France (33.3 percent corporate tax rate)and Germany (a 15 percent official rate with a bunch of surchargesand municipal taxes that bring the effective rate somewhere between30 percent and 33 percent) to low-tax Ireland (12.5 percent).

But that wasn't enough for Apple and other U.S. multinationals.Google famously used something called a “Double Irish” with a“Dutch Sandwich” to reduce its overseas tax rate to 2.4 percent.Starbucks avoided corporate income tax in the U.K. for severalyears by paying royalties to a Dutch subsidiary, buying coffeebeans in Switzerland, and other tactics. This “stateless income,”University of Southern California law professor Edward D. Kleinbardargued in a 2011 article, was becoming a “pervasive presence” that“changes everything” about corporate taxes.

Since then, the Organization for Economic Cooperation andDevelopment (the club of the world's wealthy nations) has started a“baseerosion and profit shifting” project meant to curtail suchpractices. And the EU and individual European countries have beenusing various tactics to get companies to pay up.

A big hurdle in collecting back taxes is that the past taxavoidance was generally allowed by the letter of Europeancountries' various laws. And so in Apple's case, the EU's charge isthat Ireland gave it a sweetheart deal that it did not offer toother companies. It's an alleged violation of EU competition rules,not strictly a tax case.

Still, I do think there's a lesson in it for corporateexecutives deciding how far to push their tax avoidance. When thecorporate structures you devise cross the line from frugality intoutter absurdity—and a “head office” with no employees or premisesis pretty absurd—you are asking for trouble. Or, to put it anotherway, when tax planning transmutes your corporation into acitizen of no country at all, you're not being a goodcorporate citizen.

This column does not necessarily reflect the opinion of theeditorial board or Bloomberg LP and its owners.

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