Newly released figures show just 3900 firms north of the Border applied to get help under a three-year scheme that was supposed to help about 32,000 new start-ups in the country.
The scheme to provide National Insurance contributions holidays for new firms was a centrepiece of Chancellor George Osborne's post- election emergency Budget in June 2010.
In his Budget speech Mr Osborne ushered in a period of deep cuts in public spending, which he insisted were necessary to reduce the deficit.
He tried to sweeten the pill with a range of tax breaks that were intended to help businesses grappling with a deep economic downturn. He promised the proposals would create businesses "in those regions where the private sector is not nearly strong enough".
The UK-wide scheme was intended to encourage entrepreneurs by shaving up to £5000 off the costs of employing each worker the new firms recruited.
It featured in a package of measures meant to help parts of the UK that were predicted to be hit hardest by the austerity measures, including Scotland.
Scotland, with 8% of the UK population, could have expected at least 32,000 firms to benefit and with higher levels of public sector workers would have been in line for an even higher share of the relief.
Her Majesty's Revenue and Customs confirmed that when the scheme closed to applications on September 5, 3900 businesses in Scotland had applied for the relief, with 26,050 start-ups doing so UK-wide.
Cathy Jamieson, Scottish Labour's Treasury spokeswoman, said: "Yet again, George Osborne has made the wrong call when it comes to supporting business. This scheme has been a flop in Scotland and across the UK.
"The Chancellor needs to rethink how he is going to support the small businesses that are the lifeblood of our economy."
Chic Brodie, an SNP MSP on Holyrood's Economy, Energy and Tourism Committee, said the low take-up spoke "volumes about how poorly it has been publicised and implemented".
He added: "The most recent figures showed an increase of almost 31,000, or 10% rise, in the number of new businesses in Scotland that clearly has not been reflected in the uptake of this Treasury scheme.
The Federation Of Small Businesses and Scottish Chambers Of Commerce argued that the Chancellor should have provided relief for a much broader range of firms than start-ups.
Colin Borland, head of external affairs at the Federation, said: "The narrow scope of the National Insurance contributions holiday scheme was a significant barrier to its success. These numbers clearly demonstrate the Federation was correct to argue for the programme to be expanded to include both small established businesses and all parts of the UK."
Liz Cameron, chief executive of Scottish Chambers, said the take-up was disappointing, adding: "What the Chancellor should have done in 2010 is to have reversed the planned increases in employers' National Insurance contributions, as we had counselled him at the time.
"This would have delivered an immediate benefit to all affected businesses rather than implementing an extremely selective initiative that has benefitted only a fraction of the planned beneficiaries."
Many firms spend their first year focused on survival and do not have the resources to hire people.
Start-ups may also lack awareness of tax breaks or the time required to navigate what can be complex application processes.
The Treasury said: "The National Insurance contributions holiday was a temporary, targeted scheme to help start-ups take on new staff within their first year of trading.
"Although take-up was lower than expected, the contributions holiday has benefited more than 26,000 businesses and supported more than 90,000 jobs."
A Scottish Government spokesman said: "The Scottish Government has provided firms in Scotland with the best package of rates relief for business in the UK.
"The Small Business Bonus Scheme means two in every five business properties across Scotland benefit from zero or reduced rates.
"We are attracting direct foreign investment and reaping the benefits of skilled enterprise agencies championing our workforce, resources and industries.
"The uptake of well thought out and consistent support for business tells its own story, as we have seen with the latest Office for National Satistics figures showing almost 17,000 Scottish start-up businesses in 2011 alone."