Scottish Government plans to introduce a local income tax yesterday faced another thumbs down from the business community.

The Scottish Council Development and Industry (SCDI), with a widespread membership base across the public and private sector, responded that the plan was so badly thought through that it would be better to retain and modify the council tax.

Of 140 responses to its membership survey, less than one-quarter backed the Scottish government proposal to add 3p in the pound to basic and higher rate tax bills.

Business groups have been strongly hostile to the plans set out by Finance Secretary John Swinney, whose consultation closed yesterday. They are concerned at a sharp rise in payroll costs to handle the additional complexity of different tax bands.

Ian Duff, the SCDI chief economist, said: "The introduction of a Lit will undoubtedly increase the administrative costs on business as the proportion of local tax for which employees are liable will need to be calculated.

"This will require changes to existing payroll systems. For businesses that have operations in Scotland and other parts of the UK, this may require the introduction of a completely different payroll system for Scottish-based staff incurring even more cost."

Mr Duff went on to criticise Scottish Government calculations of the amount of subsidy required to keep the earnings tax rate as low as 3 pence: "A considerable funding gap has been identified by several sources, and there is ongoing debate concerning the continuation of Council Tax Benefit revenue that is sourced from the Treasury."

Iain Gray, Labour's finance spokesman, stepped up his attack on the plans after Mr Swinney said on Radio Scotland the business criticisms were "points of detail".

The Labour MSP said this "shows breathtaking arrogance and complacency. These details' are the views of organisations from CBI Scotland to the STUC. They show the SNP tax proposals are unworkable and unfair."