Andy Kerr said there was room for improvement

Speaking as the country's councils met to set their charges for the coming year, Andy Kerr said it was a "stable" tax which worked effectively.

He said improvements could be made to the bandings and the relationship between those bandings.

But he said: "I am very concerned that we are getting ourselves into a degree of hysteria which isn't warranted."

There have been growing calls on both sides of the border for abolition of the tax, which was introduced by the last Tory government.

The issue sparked angry exchanges between Jack McConnell and Scottish National Party leader John Swinney during First Minister's Questions at Holyrood on Thursday.

COUNCIL TAX RISES The new council tax bills in full

Mr Swinney accused the first minister of "complacency" and said he was "hiding behind" the higher increases seen in England.

"The fundamental problem with the council tax is that it is an unjust tax," he claimed.

"It is wrong for the first minister and for me to pay the same council tax as a low paid worker or a pensioner on a modest occupational pension.

"We don't need to review the council tax, as he plans to do, but parliament quite simply needs to abolish the council tax and introduce a system based on fairness, justice and the ability to pay."

Mr McConnell pointed out that 80% of councils' funding came from Westminster.

He also said there was a "substantial" system of council tax benefits.

'Share the pain'

"That system can be reviewed, and it will be, by our local government finance review," he said.

"But at the end of the day, there has to be a tax system to pay for our roads and schools, and in my view it has to share the pain among as many people as possible.

"Whatever system we come up with at the end of the day, that system should be based not just on ability to pay but on efficiency, effectiveness, and on spreading the pain amongst as many people who benefit from local services as we can."

Speaking earlier to BBC Radio Scotland, Mr Kerr said he wanted the review to "test to destruction" the different taxation systems available.

"The knee-jerk reaction to rates was to give us the poll tax, and I am not going to do that," he said.

Setting bills

He said that "a bit of hysteria" had been created by some politicians and the media - and stressed that all taxes were unpopular.

"Yes, it can be improved and it can be reformed. The bandings can be looked at, the relationship between the bandings can be looked at," he said.

But he said it was a stable tax which, on whole, worked in Scotland.

Local authorities across Scotland were setting their council tax bills for the coming year on Thursday.