Sources at the Department of the Environment said the figure of one million 'proposals' - applications to appeal - had been built into statistical calculations which would help the Government to determine the level of government grants councils would receive.
Tory and Labour local authority associations are bracing themselves for an avalanche of complaints and appeals which could take years to clear.
They expect many appeals will be against the band in which property has been placed. The majority will be expected to claim their property is worth less than the valuers have estimated, because of the collapsed housing market and inaccurate valuations.
A high proportion of appeals is expected in London and the South-east, which have borne the brunt of the property market slump. House prices in this region are still relatively much higher than in other regions and southerners will be paying much higher tax than for a similar property elsewhere.
Tony Travers, director of the Greater London Research Centre at the London School of Economics, said: 'A family living in a three-bedroom semi in Wembley will be paying more than a family in a three-bedroom semi in Rochdale. It's inevitable with a property-based tax, unless the Government does something really bizarre with Transitional Relief.'
This is an amount of money, as yet unknown, which the Government plans to set aside to cushion the impact of the new tax. However, it will be phased out over a few years.
Sir Rhodes Boyson, Conservative MP for the London borough of Brent North, predicts that unless the Government gives councils in London and the South-east extra grant to reduce bills 'it will blow up like a time bomb. The council tax will be as big a disaster as the poll tax. But this time it will hit voters in the Tory heartlands. It will spell electoral disaster.'
The large number of appeals is just one of a catalogue of problems threatening to make the introduction of the new council tax a nightmare for local authorities and an unpleasant shock for millions of householders.
Ian Ward, assistant secretary of the Conservative-controlled Association of District Councils, said: 'We foresee a continuation of a reluctance to pay. There's been a change in ethos.'
According to Martin Pilgrim, assistant secretary of the Labour-dominated Association of Metropolitan Authorities: 'Fiddling the local tax has become a socially acceptable crime. It's a legacy of the poll tax.' He says that when people begin to understand how the council tax works, they will consider the system to be fundamentally unfair.
It was this perception of unfairness that killed off the poll tax - something acknowledged by the Government in the Bill introducing the council tax.
Leaflets explaining how the valuations were done and how to appeal are being sent out this week. But householders will not yet be given any indication of how much their bills will be.
Many observers believe that people's sense of grievance will be aggravated even more by the Government's intention to reject certain appeals against valuation. The valuations are based on estimates of what the property was worth in April 1991.
The Government has decided increases or decreases in actual house prices will not affect the council tax bands in which properties are placed. The Valuation Office must reject appeals based on the grounds that a property has gone down in value since April 1991. People can then appeal to an independent Valuation Tribunal.
Under the council tax formula, houses in the top band will pay just three times more than people in the lowest band, regardless of the upper value. Under the old rates system owners of a property with a rateable value eight times more than another would expect to pay eight times higher rates.
The valuation exercise has shown how, in many areas where house prices are low, the vast majority of properties are in the lowest two bands - 92.2 per cent in Scunthorpe and 92.17 per cent in Easington, Durham. This means, for example, that a hard-pressed family on a run-down council estate will be paying about as much as a well-off family in a spacious semi.
Householders are also likely to be unimpressed by the accuracy of the valuations made on their homes by the Valuations Office Agency, which is part of the Inland Revenue. Sixty per cent of properties were put out to tender to estate agents and valuers.
Problems are expected in areas with many houses of a similar type. Mr Pilgrim said many were 'Mickey Mouse valuations by cowboy operators'. In the trade they had become known as 'second-gear valuations' because estate agents would drive up a road in their car in second gear with a clipboard in one hand, putting properties in bands.
This is denied by government officials, who argue that the valuers were vetted and their valuations monitored by the Valuation Officer.
One of the biggest administrative headaches for councils will be to estimate how many people in which bands will be entitled to discounts which will be reimbursed by the Government.
The largest category, entitled to a 25 per cent discount, will be properties occupied by just one person - 33 per cent of the 21 million properties in England and Wales. Another big group will be students. Houses occupied solely by students are exempt from paying.
By the end of this month calculations will need to be completed on how many people in each band are entitled to discounts. In October or November the Government will inform councils how much money it is proposed they should spend on services, the Standard Spending Assessment; how much government grant they should receive towards this, the Revenue Support Grant; and how much Transitional Relief they should receive to cushion the impact of the new council tax on householders faced with larger bills than the poll tax.
In December, the final updated lists from the Valuation Office will be made available for public inspection. By April councils will receive the final government figures on approved council spending, government grant and Transitional Relief. Then they can fix bills.
Despite the problems, local authorities realise they must make the council tax work.
They fear that if it fails, ministers will decide to kill off local taxation and finance local government from the Exchequer by raising income tax or VAT. Only about 16 per cent of money for spending locally has to be raised by the council tax. The rest comes from the business rate and government grants.
Mr Pilgrim of the AMA said local authorities would endeavour to make the tax work eventually. 'As David Mellor said of the tabloid press, we are drinking in the last-chance saloon.'