The funding of public services will be reviewed

Mr Kerr said that the review would be the most wide-ranging ever undertaken, with no option left unexplored.

He said: "Each of the parties in this parliament have different positions, as indeed do local government and many members of the business community."

Opposition MSPs were angered that no timescale was set and the review team's membership had not been decided.

They accused ministers of kicking the issue out of the political stadium until after the next election.

Funding methods for local government considered by the review team could range from reform of the current council tax system to a local income tax.

Collection methods

It will also consider the land value tax proposed by the Greens and the service tax backed by the Socialists.

The study will consider collection methods and will take in other related matters like business rates and water and sewerage charges.

Mr Kerr told the parliament: "We will listen to what the review has to say and we will act. It is a challenging remit.

"All the taxation alternatives are up for consideration. Each of the parties in this parliament have different positions, as indeed do local government and many members of the business community.

"Our review will examine each of these alternatives."

Andy Kerr announced the review

The Scottish National Party's finance spokesman, Fergus Ewing, called for the speedy abolition of the council tax.

He said half a million pensioners could be taken out of local taxation by the introduction of a tax system based on the ability to pay.

Before the Holyrood election in May 2003, Labour promised reform of the council tax banding system under which people in the most expensive houses pay the same as those in properties costing a fraction of the amount.

The SNP said it was time for Labour to stop "tinkering at the edges" and hold a full review of how local government is funded.

The Scottish Tories said the move was another example of Labour looking at ways of increasing the tax burden on Scots who were already over-taxed.

Liberal Democrats voted to axe the council tax at their UK conference in Brighton in September but the party in Scotland did not make abolition a condition of its coalition deal with Labour.

Land values

The Scottish Socialist Party has put forward a member's bill in the Scottish Parliament proposing to replace the council tax with an income-based alternative.

SSP leader Tommy Sheridan said the current system was "hammering" the elderly who face rises much larger than increases in their pension.

The Scottish Green Party wants a levy based on land values.

Finance spokesman Mark Ballard said: "We should recognise that ability to pay cannot simply be measured in terms of income.

"Advocates of a local income tax miss out the wealth in land, land use and property which should also be considered in discussing 'ability to pay'.

"I am pleased that the executive is prepared to investigate this progressive and effective form of local finance."