Reform Scotland argues that full control over local domestic and business taxation, council mergers, integration with the functions of health boards, and creating elected provosts could all help reverse the trend of public disengagement and falling voter turnout in local elections.
Ben Thomson, chairman of Reform Scotland, which today publishes Renewing Local Democracy, said: "It is clear from the recent disappointing local election turnout that we have to take action against the erosion of local democracy in Scotland.
"This is not a party-political issue, and we hope to start a vital debate in this country that will result in a solution being found which empowers our councils, and which engages people at election time."
He added: "It is clear that a great number of people find the existence of 32 councils to be unpalatable.
"It is certainly the case that there is too much confusion caused by the inconsistent number of councils, police boards and health boards and, by making these boundaries the same and making local authorities more responsible for these essential services, we will take a big step in the right direction."
The report proposes to leave unchanged Argyll and Bute, Dumfries and Galloway, Edinburgh, Fife, Glasgow, Highland, Perth and Kinross, Scottish Borders and the three councils covering the Northern and Western Isles – Shetland, Orkney and Western Isles.
The eight others proposed would be Ayrshire (merging East, North and South Ayrshire councils); Dunbartonshire (combining East and West Dunbartonshire); East and Mid Lothian; Forth Valley (Clackmannanshire, Falkirk, Stirling and West Lothian); Grampian (Aberdeen, Aberdeenshire and Moray); Lanarkshire (North and South); Renfrewshire (Renfrewshire, East Renfrewshire and Inverclyde); and Tayside (Dundee and Angus).
It states: "Devolution was never supposed to stop at Holyrood, but it has.
"This is why Reform Scotland's reports on a range of issues from healthcare to policing and finance to planning have argued that more power needs to be devolved down to our local authorities and beyond to make those services more responsive to local needs and priorities as well as making service delivery more accountable and transparent."
Elected provosts should not be imposed, but councils should have the option to create them after referendums as a mechanism for boosting local government's accountability, it argues.
This month's elections were "a wake-up call" and could lead to a "localised Scotland" where councils have the "freedom and the financial powers to make decisions for their local areas based on local priorities," it added.
The Convention of Scottish Local Authorities said it was disappointing, woolly and "totally fatuous".
A spokesman said: "It is also interesting and somewhat odd that a think tank that champions localism is trying to deny councils the oppor-tunity to be truly local with some of the suggestions in this report."
The Scottish Government insisted current innovations meant there was no need for "wholesale structural reform".
A spokeswoman said: "Our approach to reforming Scotland's public services, following on from the Christie Commission's recommendations, is about making sure they are consistently well designed and delivered to the right people by the right people."
A Conservative spokeswoman said: "There is lots of food for thought in this report and we will give careful consideration to its conclusions."