Birmingham residents refused to pay council tax bills amounting to £11 million last year.
More than one in 20 households boycotted the tax, official figures have revealed.
But the city council insisted it was winning the war against non-payment.
Last year, it received £220 million from prompt taxpayers - but it also collected £7.25 million in late payments from residents who were persuaded to pay their bills by the threat of legal action. The authority with the worst collection rate in the country was Manchester, where one in ten bills went unpaid.
Across the country, £600 million in council tax goes uncollected every year.
Last night, Liberal Democrats said the scale of nonpayment demonstrated the need to reform the council tax.
Local Government spokeswoman Sarah Teather said: "Council tax is a bureaucratic nightmare to collect so it's no wonder so much goes unpaid.
"Every family in England could have £30 back if everybody paid their council tax. However, lots of people don't pay because they simply don't have the money.
"A fair Local Income Tax would be simple and cheap to collect, and wouldn't leave people impoverished by local taxes."
Last year in Birmingham, 94.9 per cent of bills were paid, up slightly from 94.7 in 2003-4.
A spokeswoman for the city council said: "The average council tax collection rate for the country has increased by 0.1 per cent.
"Birmingham's improving collection rate increased by 0.2 per cent, showing that we are improving at above the average rate.
"These are figures for council tax collected in the year it is due, and our collections activities continue beyond the end of the year."
The Government has appointed Sir Michael Lyons, former chief executive of Birmingham City Council, to review the system of local government taxation and consider reforms of the council tax.
Meanwhile, Meriden MP Caroline Spelman (Con) has accused the Government of planning to turn the council tax into a "wealth tax", aimed at middle class home-owners.
She said a recent Government policy paper on reform of local taxation advocated a new system of local taxation with closer links between the value of the property and the final tax bill.
This would result in soaring bills for properties valued at £200,000 or more, with no limit on the maximum bill, and doubling or trebling of the bills for higher- valued properties.
Mrs Spelman, the Conservative shadow Secretary of State for Local Government, said: "It is becoming clearer by the day that Labour will use the Lyons review as an opportunity to increase the tax burden on the middle classes, and turn a local services tax into a crude wealth tax."