ACRI Petitions High Court to Cancel Settlement Tax Benefits Law

Association for Civil Rights in Israel Files Urgent Petition Against New Tax Benefits Law

The Association for Civil Rights in Israel submitted a petition to the High Court of Justice yesterday seeking cancellation of the Tax Benefits for Residents of the Eastern Conflict Line Area Law (Temporary Provision), 5786–2026. The filing includes a request for an interim injunction to halt implementation. The petition argues that the law, passed during an election campaign, undermines equality, the rule of law, and the principle of generality in legislation by creating benefits tailored to a specific group of localities in the West Bank.

Atty. Michal Tajar of the Association stated that tax benefits require substantive, equal, and transparent criteria rather than artificial mechanisms for predetermined political results. The petition describes the measure as election bribery that damages public trust in the legislative process and calls for its full cancellation.

Criteria for Tax Credits and Alleged Reverse Engineering of Eligibility

The law provides a 7% tax credit on taxable income to residents of a preferred eastern conflict line area locality. Petition details indicate that the criteria, such as a two-kilometer distance from the fence and reliance on Ministry of Defense fortification requirements for student transportation, were not developed through professional staff work. Instead, the petition claims these standards resulted from reverse engineering to match a predetermined set of localities.

The Association contends that this approach establishes a separate track under security pretexts while excluding other areas facing comparable threats, including northern localities under shelling during the period the law was advanced. The structure is presented as creating an economic incentive for relocation to the occupied territories.

Finance Committee Debates Marked by Factual Disarray and Changing Locality Counts

Protocols from the Finance Committee debates, as cited in the petition, reveal repeated shifts in the law's wording from a general threat-level standard to technical measures of distance and fortification. Committee members voted without a final list of localities or a complete budgetary assessment. The number of eligible localities increased during discussions from dozens to 38, then 59, and ultimately 149.

Committee legal advisor Atty. Shlomit Ehrlich warned in writing that frequent changes and incomplete data prevented informed decisions based on reliable information. She noted that the process marked a target in a manner contrary to precedent on tax benefits.

Professional Opposition from Government Ministries and Silencing of Data

Representatives from government ministries expressed opposition during the debates. Atty. Liron Naim from the Ministry of Justice stated that the process proceeded without an infrastructure. Tax Authority representative Natalia Miranchov indicated that tax benefits do not address security threats effectively, noting that such measures would not assist security considerations and might not serve as the appropriate response.

Budget Department representative Elkana Riklin attempted to present studies from the Bank of Israel and the Chief Economist showing limited effectiveness of tax benefits for encouraging immigration, with high costs estimated at least NIS 339 thousand and 300 per additional net immigrant over four years, much of which would reach existing residents. Finance Minister advisor Barak Rosenfeld intervened to direct that only the minister's political position be presented, leading the Tax Authority representative to withhold the data.

Negotiations Among Parties and Deviation from Established Income Tax Mechanisms

Following the restriction on professional input, discussions shifted to political negotiations on benefit scope. Representatives of Haredi parties, including MK Yinon Azoulay of Shas and MK Moshe Gafni of United Torah Judaism, noted that the fortification criterion excluded Haredi localities in the area.

The petition positions the law as a departure from the equal distribution framework in Section 11 of the Income Tax Ordinance, established after the High Court ruling in the Nasser case. It contrasts the current measure with the tax benefits for Gaza envelope localities and rehabilitation benefits for Tekuma region areas after the October 7 massacre, which relied on staff work and objective indices. The new law applies immediately and retroactively from January 1, 2026.

Request for Immediate Halt to Benefit Distribution Pending Court Ruling

The Association for Civil Rights in Israel seeks an urgent interim order to stop distribution of the benefits until the High Court rules on the petition. The filing cites concerns over use of public funds for partisan purposes and potential irreversible effects on election integrity.

The petition emphasizes that the law was enacted amid factual inconsistencies and without the comprehensive preparation applied to prior conflict-line measures.