Local authority chiefs in Moray want to raise council tax by as much as 18% to help pay for vital services.
They could become the first in Scotland to defy the SNP government and scrap the eight-year nationwide freeze on the charge.
They say they have been forced to consider the “previously unthinkable option” because of a £5million reduction in funding – which has left the council facing a deficit of nearly £12million.
If the move is backed by councillors next month it would mean council tax bills for Band A properties increasing from £756 to £892 and the charge for Band H homes rising from £2,270 to £2,678.
But the Scottish Government last night branded the move “unnecessary and premature”, while opposition councillors questioned the “ridiculous” scale of the increase.
Moray Council faces losing more than £1million in government funding for breaking the agreement on freezing rates.
But local authority leader Stewart Cree said the sum “paled into insignificance” compared with the deficit the council was facing.
He said the radical proposal was prompted by a reluctance to cut public services.
The authority plans to match the £5million it aims to raise by increasing council tax with funds from its own reserves, and says an additional £1.9million can be found from in-house savings.
Mr Cree said administration members collectively came to a “creeping realisation” that upping council tax was the only way to avoid axing vital services.
He added: “The savings we need to make simply can’t be achieved without cuts to services the public has told us they want protected.
“In times like these, we have to be bold and this is a bold step.
“But this is the only alternative to having swingeing cuts across services like schools and libraries.
“People in Moray have simply had their fill of cuts, and I for one have no stomach for further reductions.
“We recognised that we have very few options, and now we face the previously unthinkable option of increasing council tax.”
A Scottish Government spokesman said: “All public organisations must operate more efficiently to protect public services.
“We have fully funded the council tax freeze, and included a further £70million in the coming year’s settlement to enable councils to fully meet its costs.
“There is no need for an increase in council tax, the announcement by Moray Council is both unnecessary and premature.”
The spokesman blamed reductions to the Scottish Government’s budget by the Westminster government for recent council funding cuts.
Leader of Moray’s opposition SNP group, Gary Coull, said: “This is a massive hike, it really is unbelievable to see the administration propose such a blow to residents’ pockets.”
Mr Coull also expressed “extreme disappointment” that during a supposed “open and transparent” discussion on budget matters on Tuesday, administration members made no mention of the ploy.
Fochabers Lhanbryde member Douglas Ross added: “I feel the council tax freeze was a gimmick by the SNP central government, and they never properly funded local councils for the shortfall.
“That said, announcing a council tax increase of 18% in one year is almost as crazy.”
Moray MP Angus Robertson said he was “utterly incredulous” at the announcement, which he said would “hammer the people of Moray”.
Local MSP Richard Lochhead added: “Moray Council’s Tory and Independent Administration is showing just how out of touch it is with the people of Moray with this outrageous plan.”
The proposed changes will be voted on at a meeting on Wednesday, February 10.