Presidential Decree puts municipalities' financial structure in jeopardy

The Presidential Decree published in the Official Gazette on November 27, 2024, has sparked debate among local governments. The decree provides for changes in the principles regarding deductions to be made from the shares allocated from general budget tax revenues against the debts of Metropolitan Municipalities, Special Provincial Administrations, municipalities, and their affiliated organizations. According to the new regulation, the debts of companies directly or indirectly owned by municipalities will also be included in these deductions.

SHARP REACTION FROM CHP: “ANOTHER UNLAWFUL STEP!”

CHP Deputy Chairman in charge of Local Governments, Gökan Zeybek, reacted sharply to this decision. Arguing that the regulation is contrary to the law and aims to push municipalities into a financial bottleneck, Zeybek made the following statement:

"The goal is not to tie the hands of municipalities, but to cut the services the public receives. Republican People's Party municipalities have overcome all kinds of difficulties and will continue to do so."

ANOTHER BLOW IS DEALT TO MUNICIPALITIES WITH A PRESIDENTIAL DECREE.

With the Presidential Decree published in the Official Gazette, the total collection of General Budget Tax Revenues against the debts of Metropolitan Municipalities, Special Provincial Administrations, Municipalities, and their affiliated organizations… pic.twitter.com/jDzHc6JqG6

— Gökan Zeybek (@gokanzeybekCHP) November 27, 2024

MUNICIPAL COMPANIES HAVE JOINT-STOCK STATUS

Zeybek stated that the vast majority of municipal companies have the status of joint-stock companies and that, according to the Turkish Commercial Code No. 6102, these companies are responsible as legal entities only with their own assets. He described the use of company debts as a basis for making deductions from the municipal budget as "unlawful" and "illegal."

Referring to the legal definition of joint-stock companies, Zeybek stated that this responsibility is regulated by law and cannot be changed by a Presidential Decree. He also underlined that this situation is contrary to the hierarchy of norms.

PUBLIC SERVICES AT RISK

The new regulation may lead to financial distress for municipalities due to deductions from general budget revenues. This raises concerns that it could cause disruptions in the services municipalities provide to the public. Furthermore, there is concern that essential services such as salary payments for lower-level staff and the payment of Social Security Institution (SGK) premiums could be interrupted.

DEBATES CONTINUE

While the legal and financial effects of the regulation are being discussed, questions are being raised about whether the decision is a tool for political pressure. What the long-term effects of this decision, published in the Official Gazette, will be on municipalities remains a matter of curiosity.

Legal experts and politicians state that action should be taken for the cancellation and stay of execution of the decision. On the other hand, opposition-led municipalities emphasize that they will continue to provide services despite such difficulties.