It is almost unbelievable to what extent some people are prepared to go to defraud the state or to abuse the social welfare system.

The mind simply boggles at the amounts often involved. This is, of course, not something peculiar to Malta but, considering the smallness of the country, the extent of such fraud and abuse is somewhat surprising.

Fraud and abuse represent a loss of revenue to the government, money that the state often badly needs to make both ends meet, especially in times like the present, when the slowdown in economic activity abroad has dealt a blow to Malta's economy. Maybe, as the Prime Minister has said so often over the past few weeks, the blow is not as hard as that some other countries have suffered but it is a blow nonetheless. The economy is, in fact, still in recession and growth next year is expected to be small.

There are then the criminal and immoral aspects of fraud and abuse that have to be taken into the equation, matters that any government worth its salt would want to check. In the budget for next year, the government has come out with a very important reform: the merger of three tax collecting institutions, inland revenue, VAT Department and Customs and Excise. Finance Minister Tonio Fenech explained that, through the amalgamation, they would be in a better position to enforce the fiscal laws.

It is a most sensible move, one that can help streamline the tax collecting points, making it far more cohesive than it is now. It will need careful planning and organisation but, if done professionally, it could considerably help check fraud and abuse, which is the main aim that prompted the government to take this course. The move comes in the wake of the big fraud case at the VAT Department this year.

Only a few days ago, it was revealed that Enemalta has recovered more than €3 million from customers who had tampered with water and electricity meters. The corporation, now very much in the news again over its plan to raise electricity rates, is in the process of installing smart meters. But there have been other cases of fraud and abuse over the years, as the latest fraud figures from European Commission shows only too well.

According to a new study released by the Commission, Malta appears to have "lost" a staggering €305 million in VAT proceeds between 2000 and 2006. The Commission's study calculates the VAT gap of EU members by working out the difference between the theoretical net VAT liability for the economy as a whole and the actual VAT receipts. The shortfall is the result of fraud and unpaid VAT liability due to insolvencies.

Although the figure of lost revenue through VAT fraud is only theoretical, clearly the actual amount lost must be substantial. Similarly, a good portion of the €600 million in tax arrears still owed to the government may be unrecoverable but, through the amnesty the government has given on the payment of part of the fines involved for non-payment, it hopes to, at least, recover part of the sum.

Hopefully, there would be no obstacles in the way of merging the three tax institutions because, as a result of the move, the country stands to gain a lot by way of a more efficient system of collecting what is due to the state in terms of tax.