Tax and democracy ... always tricky

Scottish Labour don't have that luxury, or so the received wisdom runs. They have told us that if we ignore the nasty Nationalists and vote No on September 18 next year, a better Scotland will be just around the corner. Specifically, it will be a Scotland equipped with a more useful parliament.

Johann Lamont formed a commission to think about all of this. Nine-strong, bright and busy for months on end, they have emerged at last with the snappily titled Powers For A Purpose: Strengthening Devolution, The Scottish Labour Devolution Commission Interim Report. A fascinating document – no, seriously – it is, too.

On one level, the commission gets to the heart of the matter. "By any international standard," they state, "the Scottish Parliament has very wide spending powers, but by comparison, narrow tax powers." What could better exemplify devolution than a system whereby money raised in Scotland is spent in Scotland for the benefit (presumably) of Scots? Even the Conservatives have recognised this is the closest you get to accountability short of the electronic tagging of politicians.

The gulf between principle and practice is wide, however. On page 28 of the commission's report there is a table (table 3.1, to be precise), no doubt included to help newspaper columnists with limited attention spans. Its title is: "Estimated breakdown of tax revenues and scope for further devolution." It gives the lot (North Sea revenues aside): income tax, VAT, national insurance, corporation tax, capital gains tax, and various other duties and levies.

Time after time, a phrase is repeated: "concerns about avoidance." If that doesn't cover the case, the authors mention other difficulties. The idea Holyrood might have control over corporation tax, for example, is answered thus: "Technically possible but tax competition issues; profits are readily mobile." This means, first, London would be unhappy if Scotland had a lower rate, and second, big firms could perform sleights of hand with their profits.

The commission doesn't quite abandon the whole idea of giving Holyrood more muscle, but it comes close. As its report makes clear, the commissioners will not support big changes if Scotland looks like doing too badly, or looks like doing too well. The former is a poor idea even according to my arithmetic, the latter amounts to a warning: if the Scots seem too prosperous, the Barnett formula governing budget changes will be altered and we will be no better off.

All this is tricky, no doubt, if your aim is to keep the UK together. It also throws interesting light on common beliefs about taxation. In theory, all that's truly at stake is a tax jurisdiction. Instead of handing over money for X, Y or Z to London, it is handed over to Edinburgh. Instead of judging Westminster accordingly, judgement would fall on Holyrood. Democracy is thereby improved. How hard is that?

The commission sees nothing but problems. You take its point where smugglers of booze and fags are concerned – two adjoining tax regimes operating different rates offer an open invitation to anyone happy to ignore "concerns about avoidance". But why should big, legal, law-abiding companies or their "readily mobile" profits prove an obstacle?

It's no big deal, just the scandal of the century. Inadvertently, Labour's commission invites a question. If a Scottish exchequer couldn't guarantee to collect a fair share of corporation tax, how does HM Treasury manage the trick? The answer – nothing to do with devolved powers – is that it doesn't. Labour's nine thinkers are pointing to a global scam that affects every country and region, independent or devolved. You can contemplate the issue when your next electricity bill arrives.

Two of the "Big Six" energy firms have "Scottish" in their names. Last week, we heard one, ScottishPower, paid £102 million in corporation tax in 2012 on pre-tax profits of £1.2 billion. This year's rate is 23% on "business profits and other forms of income, as well as on chargeable gains accruing to companies". It is due to fall to 20% in 2015. Pick any rate you like, however, and you won't – on paper – get away with £102m.

BUT Scottish Power is not the worst. RWE, the German firm behind npower, made £766m profit between 2009 and 2011 and paid no tax at all. E.on, also German, paid £532m from 2007 to 2011 on pre-tax profits of near £5bn. French-owned EDF paid "over £200m" on a pre-tax profit of £1.7bn. And one of this elite group, SSE, just got fined a whole £10m for mis-selling. What peasants fail to understand is that these companies get legal tax write-offs because of all the investing they do to "keep the lights on", not because investing is just what a business does. They're practically charities, you see, performing a valuable social service.

If their charges look like an ever-upwards Mexican wave, that has nothing to do with them, and is certainly not because they act as a cartel whose average profit this year will be around £100 per household. They are at the mercy of market forces, poor corporate giants, and have no control over wholesale markets in which – strange to report – they are busy and active players. They are immune to sarcasm, too. E.on, one of the German operators, has just turned itself into E.on SE. The last part, translated, stands for European stock corporation.

Why? I defer to Der Spiegel, a German periodical rarely guilty of left-wing views. Last November, it reported that E.on was being transformed to escape "Germany's rigid rules granting employees a say in company management", and to make it easier for the firm to avoid national and international fiscal authorities.

Why not? The tax avoidance division at Barclays Bank drummed up revenues of £1bn a year between 2007 and 2010.

Globally, Apple paid $130m (about £85m) in taxes on foreign earnings of around $13bn (about £8.5bn) in 2010. Microsoft paid $1.7bn on $15bn in foreign earnings. Cisco, the software firm, paid $400m on foreign earnings of more than $8bn. You will have heard, meanwhile, about Starbucks, Amazon, Google and the rest.

Paying tax at the stated rate, failing to move money around inside the company – a key element, hilariously, of "global trade" – or between foreign outposts is the mark of the stupid. In a country such as Britain, the peasantry soon enough forget that they are being held hostage by power firms, rail companies or water suppliers they used to own.

Royal Mail is next up for privatisation, and with it the universal service obligation that means everyone, everywhere, gets the same postal service at the same price. Then the multi-nationals will move – in England, they have already moved – for the biggest public asset left in Europe, the NHS. All of this is funded, ultimately, by common dopes who pay their taxes at the stated rate.

Scottish Labour's report says, in essence, that this little country cannot be protected from trans-national thefts. That leaves a question: so who can be protected?