Municipal Budgets Face Contraction: Lighting Deductions Tripled in Official Gazette

A recent Presidential Decision published in the Official Gazette introduces a structural adjustment to Turkey's fiscal federalism, signaling a significant contraction in municipal revenues. This sharp increase in deductions from general budget tax revenues for local governments limits the fiscal flexibility of metropolitan municipalities, particularly, while strengthening the central government's financial oversight.

Centralizing Pressure on Local Revenues

Under the new decree that has entered into force, the financial burden of lighting expenses—one of the most fundamental expenditure items for local governments—has been heavily shifted onto local administrations. The tripling of previously applied rates increases the unpredictability of local budgets, potentially leading to a curb on investment expenditures.

■The deduction rate from general budget tax revenue shares for metropolitan municipalities and contiguous areas was raised from 20% to 60%.

■For other municipalities, this rate was increased from 10% to 30%, marking a threefold increase.

■60% of lighting expenses outside these limits will be covered by the relevant special provincial administration share.

■The regulation became effective upon publication, retroactively valid from January 1, 2026.

Fiscal Implications and Implementation Timeline

With this change, the liquidity gap emerging in municipal coffers poses a risk of manifesting as a decline in the quality of local services or the postponement of new infrastructure projects. Since it is effective from the beginning of 2026, it has become inevitable for local governments to revise their budget planning made since the start of the year.

As Dr. Aslıhan Demir, I view this decision as a critical tipping point for the fiscal autonomy of local governments. This threefold increase in deduction rates is not merely a loss of revenue but a harsh step towards the centralization of fiscal discipline. While a tightening in municipal expenditures is expected, this situation could suppress vitality in local economies in the short term and act as a brake on general economic activity.