Turkey: New Constitutional Court Decision: European Provision Of Autonomy Of Local Governments And Its Impact On Turkish Law

Last Updated: 26 February 2014
Article by Zeki Gündüz

Art. 73/3 of the Constitution clearly expresses that basic elements of taxation can only be determined by law, and Art. 73/4 entitles the Council of Ministers to take explanatory and subsidiary administrative action provided that the council stays between the lower and upper limits which are, again, set by law. As a rule, taxation is made by law. The authority to determine taxes is given to the Council of Ministers only by law, but this authority can never allow the Council of Ministers to go over the limits set by law. This authority is an exceptional one. The main guiding principle is "legality of taxes", which means that taxes can only be set by law. The exception to this principle is that taxes can be set by the Council of Ministers provided that the lower and upper limits are set by law and these aforementioned limits are not exceeded when evaluated using concrete and objective criteria. This exception is called "limited delegation of authority".

In the case in question Art. 60 of Municipality Revenues Law no:2464, which regulates the fact that the license fee amount for working on holidays can be set out by Municipalities provided they do not exceed the limits set by law, was brought before the Constitutional Court. The question of law in this dispute is the fact that even though only the Council of Ministers has this authority, hereby with this law this authority is given to Municipalities. The other issue emerging from this dispute is the fact that the concrete and objective criteria used to ensure the tax is set within the lower and upper limits are not obvious.

It is unavoidable that this aforementioned European Court decision will be discussed in terms of its content and legal grounds. The Turkish Constitutional Court, which has been shown to maintain a "conservative" approach to date in terms of referring to supranational text for tax dispute resolution, made a reference to a supranational text for the first time and paved the way for new discussions of doctrine and practice.

In the evaluation made by the Turkish Constitutional Court, which took into consideration the provision of financial autonomy of local governments in the Constitution and the European Provision of Autonomy of Local Governments that Turkey is a party to, no contrariety to law was found in the fact that authority for setting the amount of license fees was given to municipalities.

According to the dissenting vote, "de lege ferenda" and "de lege lata" need to be distinguished. The dissenting vote put forward that the decision made by the Constitutional Court was made as per "de lege ferenda" which means "with a view to the future law" and criticized by stating that de lege ferenda cannot be a ground for a court decision.

The reference made to the European Provision of Autonomy of Local Governments and the acceptance of the autonomy of municipality parliaments regarding the determination of work license fees are open to discussion, particularly in cases were the span between lower and upper limits is wide. For instance the fact that there are no concrete and objective criteria for how to determine a tariff, the upper limit of which is 40 times higher than the lower limit, is inconvenient in terms of legal security. The aforementioned European Court decision is expected to generate much discussion, especially in terms of the authority given to municipalities to set the estate unit value as per real estate tax law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Zeki Gündüz
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