Magnificent paintings hung behind German Finance Minister Wolfgang Schäuble at his press conference in the historic Grandmaster's Palace in Malta. Prominent among them, images of the "Fall of Man" and "Expulsion from the Garden of Eden," complete with ornate, gilt Baroque frames. Reporters joked: "This must - appropriately - have something to do with an expulsion from tax havens." The meeting of 28 EU finance ministers was, after all, called to deal with the issue of curbing international corporations' excessive tax avoidance.

Ironically, it was Malta, which has a reputation for being a tax haven of sorts, and currently holds the EU Council presidency, that called this informal meeting at the opulent palace in its capital, Valletta. Tax rates for businesses are relatively low in Malta. And several EU diplomats were quoted as saying that companies are allowed to exercise a certain amount of creativity in their tax planning on the island.

Of course, the host, Maltese Finance Minister Edward Scicluna, denies such accusations. He, too, claims to be in favor of a fair taxation of multinational corporations who have, until now, successfully avoided paying taxes on earnings to national financial authorities by shuffling profits between subsidiaries in Europe. "Nevertheless," according to Scicluna and representatives from other small European countries such as Belgium and Luxembourg, "we need to ensure a certain amount of tax reliability as well." Belgium and Luxembourg have also attracted international companies like Google and Amazon with their low tax rates. Belgian Finance Minister Johan Van Overtveldt said that tax laws could not be changed "every five minutes," adding, "we should not act hastily."

Fighting tax avoidance together

Speaking in the bejeweled throne room, German Finance Minister Schäuble said that the issue of tax reliability could not be used "as an excuse to defend the imbalances of an unfair tax system." He went on to declare that members would energetically commit to fighting the excessive exploitation of existing tax law.

The so-called "Base Erosion and Profit Shifting" (BEPS) initiative was introduced years ago by the Organization for Economic Co-operation and Development (OECD) and the G-20, a group of 20 of the world's wealthiest countries, in an effort to fight tax avoidance. According to the initiative, companies are supposed to pay taxes in the countries in which they earn their profits. However, implementation of the plan has been anything but easy. EU finance ministers acknowledge that the plan can only work if the United States and Asia truly cooperate.

Furthermore, Luxembourg's Finance Minister Pierre Gramegna fought back against the concept of retroactively applying possible tax reforms. He argued for arbitration proceedings between states and corporations to settle tax disputes. Tiny Luxembourg has been the subject of much attention since it came to light three years ago that its financial authorities had attracted some 300 international corporations by agreeing to a tax rate around 0 percent. At the time, the so-called "Lux Leaks" affair sparked a global discussion about tax avoidance and tax planning.    

Heading for the same destination at different speeds?

As is usual at such informal meetings, finance ministers made no decisions. As Schäuble explained, the Malta meeting was designed as an opportunity to think about and intensively discuss specific topics. One important issue, for example, was achieving consensus about how to tax the digital economy. Ultimately, profits generated online are not bound by national borders. Where should such profits be taxed? "The trend is racing ahead." Schäuble warned. "But no one knows what it will bring in the future. It is not an easy subject."

Once again, finance ministers discussed the future of the European Union and its common currency, the euro, in light of the Rome Declaration issued in March. The Declaration stated that the Union will push for the integration of different interest groups at different speeds. That was a reaction to Brexit and the growing nationalist trend seen in individual member states. Speaking in Valletta, Schäuble said, "Different speeds do not have to lead to a break up of Europe; rather, they could actually make it more efficient."

Schäuble went on to say that the potential for progress on the topics of financial policy and the eurozone were limited because they demand unanimity. Many of the reforms being discussed - for instance the creation of a European finance minister post, individual budgets for EU member states or more solidarity - would all necessitate changes to EU treaties. "Treaty changes are unrealistic at the moment," according to Schäuble. "It isn't worth the effort." In Valletta he repeated his mantra: "We have to apply the rules that we have." He says it will make the Stability and Growth Pact (SGP) more credible and strengthen the Economic and Monetary Union (EMU). The same applies to the banking union and saving ailing banks in individual member states.

Step forward - then continue in a circle

The concept of a common European "bad bank" that could take on bad loans from commercial banks so that they could clear their balance sheets has finally been done away with. The proposal, which European banking regulators once put forth, was not even mentioned. Wolfgang Schäuble simply said, "Everyone understood that it was not a reasonable concept." He, along with other northern EU finance ministers, had been strictly opposed to the idea of having to take responsibility for bad loans in Greece or Italy.

Bank restructuring, when necessary, is now to be dealt with by national "bad banks." In Greece, the percentage of loans that cannot be paid down by borrowers is around 47 percent. In Germany that number is under 3 percent. Europe has the ability to deal with a great number of financial issues, "but essentially we tend to walk in circles," said one pensive EU diplomat during a discussion in Malta.