Nicola Sturgeon said the workplace parking levy lays the foundation for the Scottish Government's "biggest decentralisation of power", following criticism that "devolution has stopped at Holyrood".
The First Minister told the Cosla conference her government wants to allow local authorities to make more decisions locally, citing the controversial Transport Bill and so-called tourist tax proposals as additional powers for councils.
Speaking in Fife today as the Transport Bill was debated in Holyrood, Ms Sturgeon used the example of the workplace parking levy as a sign of things to come from the Scottish Government's ongoing review of local government.
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"We want to do more to empower individuals and communities," the First Minister said, adding "across the country there is a real appetite for more local decision-making".
"The Transport Bill that is going through Parliament in its final stages today contains in it the new power for authorities around workplace parking - something that has been hotly contested in the Scottish Parliament," she said.
"But it is a power, it is not a duty.
"It is illustrative of the approach of devolving more power to local authorities to allow local authorities to make those judgements and to take decisions that they think are right for the local circumstances and local needs."
The Transport Bill, with provisions for the workplace parking levy, was passed by MSPs by 56 votes to 29 this evening, shortly after the First Minister's speech.
The new legislation, which Ms Sturgeon acknowledged "we are not doing without a degree of controversy", gives councils the power to charge businesses an annual fee for every parking space they provide for workers, with the firm able to decide whether to pass the cost on to staff.
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"Not all local authorities will want to use all of these powers but the whole idea is that it should be for local authorities to decide," Ms Sturgeon told delegates.
Referring to the local governance review, Ms Sturgeon continued: "The Scottish Government and Cosla will now work in partnership with local authorities, other partners and communities to develop the practical proposals.
"Obviously we don't yet know what the precise outcomes of that review will be, but I am personally very strongly committed to ensuring that it does bring about real, tangible and positive change, and, in the process of that, much stronger local democracy.
"My hope is that this can, and will, lead to the biggest decentralisation of power in Scotland in the 20 years since devolution."
Cosla president Alison Evison had opened the annual gathering of Scotland's local authorities by arguing that "one of the sad paradoxes of devolution from Westminster to Holyrood is that by and large the devolution of powers has stopped at Holyrood - not enough power has come from Holyrood to town halls".
Calling for a "stronger arrangement" between local authorities and the government, Ms Evison added: "Over the last 20 years of devolution in Scotland many barriers have been faced by people in our communities as they try and live the best life possible.
"Local government has risen to the challenge, we advocate and fight for our communities and we remain as relevant today as we did 20 years ago, but we have not had a commensurate rise in our powers.
"We have not benefited from devolution."