Aberdeen City Council would be fined more than £3 million if it were to break the council tax freeze – despite already getting the smallest cash pot from the Scottish Government.
The crippling penalty means the local authority would have to raise council taxes by 3.2% just to break even.
The Press and Journal revealed in December that the Granite City had been short-changed by £17million in the Scottish Government’s budget.
Councils have been under increasing financial pressure since Finance Secretary John Swinney slashed their funding by 3.5%, with Moray recently announcing its intention to raise tax by 18%.
Finance Convener Willie Young said: “It is a matter for the local authority to determine council tax – it is not for John Swinney to decide, it is a matter for us.
“What he does is say, if you take the council tax freeze, I will give you £3.3million. We haven’t seen his final letter to decide whether to accept that or not accept, but we would have to raise council tax by 3.2% just to break even.
“We want to work with the Scottish Government but it is not a one-way street.”
Scottish Liberal Democrat MSP Alison McInnes added: “Aberdeen has the worst local authority funding settlement in the country. The SNP have broken their promise three years in a row to give the city at least 85% of the Scottish average.
“Now Aberdeen faces a double whammy. If the council takes the tough choice to raise even a single pound more from council tax they would be slapped with a fine of £3.3million from the Scottish Government.
“Local authorities have been put between a rock and a hard place by a Scottish Government that is more concerned with spin than the reality of what the latest cuts will mean, especially for schools and the future life chances of children.”
A spokesman for Mr Swinney said people in the north-east would “concerned” at the spectre of a possible tax hike by councils who have been treated “very fairly” by the executive.
He added: “Contrary to what has been claimed, recent independent research suggested that the Scottish Government has over-funded the council tax freeze, and that between 2008/9 and 2013/14 councils received £164.9m more than they would have by simply increasing council tax by inflation.
“This money is provided to councils specifically so they do not have to increase council tax – and therefore to protect local council taxpayers from the sort of exorbitant council tax increases they endured under the previous Labour/Lib Dem Executive.”