New Israeli Discriminatory Tax Law Ties Benefits to Northern Towns' Ethnic Composition, excluding Arab Towns
Adalah - The Legal Center for Arab Minority Rights in Israel sent a letter on behalf of 13 Arab local councils in northern Israel to the Ministry of Interior, the Ministry of Finance, and the legal advisors to both the government and the Knesset’s (Israeli parliament) Finance Committee. The letter demands the repeal of discriminatory criteria in the "Encouragement of Mixed Cities Law," passed by the Knesset in late March 2026, which excludes Arab towns from tax benefits by using the town’s ethnic composition as the qualifying criterion, perpetuating a pattern of systematic discrimination.
The letter was sent on 10 May 2026 by Adalah Attorney Salam Irsheidon behalf of the heads of local authorities in: Reina, Iksal, Eilut, Mashad, Dabburiyya, Yafa an-Naseriyye, Ein Mahel, Kafr Kanna, Basmat Tab'un, Zarzir, and the Joint Council of Kaabiyye-Tabbash-Hajajre.
The new law grants tax reductions, equivalent to 12% of income (in households of maximum income of NIS 226,560 annually), to residents of towns where the Israeli Jewish population comprises between 35% and 55%, and which are classified as peripheral according to state rankings. The stated justification is that these towns suffer from affluent residents leaving for neighboring towns that already enjoy income tax benefits, thus weakening these towns and decreasing personal safety in them. In practice, the law is inspired by racist motivations, and excludes Arab towns which actually suffer from these issues solely on the basis of an ethnic criteria.
In the letter, Adalah argued that the law is discriminatory as it applies a criterion based on the ethnic composition of the population rather than objective measures of need. Many Arab towns suffer conditions far more severe than those the law claims to address, including higher poverty, more acute infrastructure gaps, greater population flight, and higher rates of organized crime, yet are denied tax benefits solely because they are not ethnically “mixed”.
Nazareth is a prominent example. It is classified as economically peripheral and has high rates of residents leaving for neighboring towns, including Nof HaGalil, which qualifies under the law. Nazareth does not. Towns such as Reina and Iksal face comparable conditions and are likewise excluded.
Adalah stressed that ethnic identity is not an objective or relevant criterion for the law's stated goals of economic development, reducing population flight, or improving personal security, and that basing eligibility on ethnicity renders the law unconstitutionally discriminatory. Adalah thus demanded that the law's ethnic composition criterion be repealed and replaced with professional, needs-based standards that reflect the actual conditions of communities, free from national or ethnic considerations.
Photo: Chaim Goldberg, Flash90
