Offers of one time settlements (OTS) at regular intervals may encourage defaulters to refrain from paying VAT and adversely affect honest payers and the state's revenue-gathering efforts, the ad hoc panel on finance has stated in its first report to the Goa legislative assembly.

Noting that the governmentwhich had introduced OTS on value added tax twice, in 2000 and 2004 proposed to do it in 2009 during a total period of 45 years of sales tax regime, the panel headed by MLA Agnelo Fernandes felt that recovery of outstanding dues was comparatively more effective during the 35 years of sales tax regime up to 1999.

The panel felt that frequent offers of OTS may prompt tax payers to keep their dues outstanding as they will be sure that the government will float the scheme sometime in the near future. "Such a predictable picture is not conducive for the revenue earning department and for regular honest payers, who will definitely feel that if they had been defaulters they would have benefited from the scheme," the panel said.

When the panel had conducted a meeting to get suggestions from the public, a citizen had bemoaned the government's policy of rewarding defaulters with OTS instead of honest payers.

Conceding the point, the panel expressed the view that the number of defaulters would increase and the government's revenue-gathering effort would be adversely impacted.

In its reply, an official denied the charge of encouraging defaulters stating, "OTS schemes are not regularly floated, but only under specific circumstances." Explaining the reasons, the official stated that from 1964 to 1999, certain overdues in books of commercial taxes department were due to long pending litigations, levy of interest and penalties on the principal dues or post assessment penalties. OTS during 2000 helped to ascertain such payments and wherever it was interest and penalty, was settled.

The second OTS scheme in 2004 was necessitated by the heavy losses suffered by the tourism industry because of the 9/11 attacks on the World Trade Centre and earth quake and riots in Gujarat in 2002. The third scheme has been proposed as part of the process to stabilize the new system after change in taxation to VAT and all pre-VAT assessments had to be completed on priority.