People who have failed to file state tax returns or under-reported their income are being given a chance to wipe the slate clean.

Over the next month, the state is offering a tax amnesty program encouraging offenders to step forward to pay what they owe without being charged a penalty.

It's the first time Hawai'i has offered such a program, joining a growing number of states doing the same as they look for quick tax revenue injections. The state's Tax Fresh Start began yesterday and will run through June 26.

"My advice to taxpayers is to come clean in the next 30 days," said state Tax Director Kurt Kawafuchi.

"It's the first time we're offering this type of program. And it will be the last time."

The state estimates it could be missing out on more than $1 billion in taxes each year from businesses and individuals who are on a cash-only basis or who don't file tax returns, and those who have not reported all their income or overstated deductions or credits.

Kawafuchi hopes to rake in millions of dollars through the amnesty program, adding money to tax coffers strained by economic downturn.

At least seven other states — Alabama, Arizona, Maryland, Connecticut, Massachusetts, New Jersey and Virginia — are pursuing similar amnesty programs this year to replenish tax coffers.

"It's a rather popular way to get 'new' revenue," said Joe Henchman, director of state projects at the Tax Foundation in Washington. "It is a trend this year we are seeing."

Like other states, Hawai'i is looking to pump up tax revenues because of tax shortfalls in a poor economy. The state Tax Department has become more aggressive in collecting taxes, including posting a list of the biggest delinquent taxpayers on its Web site and requesting more auditors to go after scofflaws.

The Fresh Start program is typical in that it is temporary in nature and, as an inducement, cuts out penalties and reduces the interest rate normally imposed for late filing.

Hawai'i's tax regulators can charge up to a 25 percent penalty and an 8 percent per year interest rate on late payments. Under Fresh Start, people will only face a 4 percent interest rate.

Thus, someone who might have paid a $1,000 tax bill, $250 in penalties, and $80 in interest will see a bill of $1,000 plus $40 in interest under Fresh Start.

"We're giving people an opportunity to come clean and we're offering them a good deal," Kawafuchi said.

He said people who don't file during the amnesty period will probably face a more adverse environment after Fresh Start lapses because a legislative bill before Gov. Linda Lingle lengthens the statute of limitations for tax offenses and imposes stiffer penalties.

It also adds more auditors and resources to go after people who don't report cash transactions, whether they operate at someplace like a swap meet or are contractors who get paid under the table.

Kawafuchi said he expects out-of-state businesses and property owners to take advantage of the program.

There are risks for people who come clean, including possible criminal prosecution if there's been fraud involved. If they haven't been filing federal taxes, the IRS also may contemplate action.

Henchman said amnesty programs have another downside in that people who've dutifully paid their state taxes will feel left out. Tax cheats may wait for such programs to come around again if a state repeatedly offers amnesty over a several-year period, he said.

"People will come to expect them," he said.

But there are no plans to run an amnesty here again. Kawafuchi said the state is undertaking it only because it has to balance off tax fairness with economic realities.

Moreover, it may be more efficient to run a one-time program to get money in easily rather than pursue lengthy audits and lawsuits for back taxes, he said.

"We're being cautiously optimistic that we can collect in the seven digits — in the millions," Kawafuchi said.

"We hope as many taxpayers take advantage of this as possible."