The Petition (H)
The Order to Show Cause (H)
On 4 January 2006, the Supreme Court of Israel held a hearing on a petition filed by Adalah in July 2005 demanding: the cancellation of a discriminatory amendment to the Income Tax Ordinance (Amendment No. 146) enacted by the Knesset in June 2005; the application of clear and consistent criteria in determining which localities receive income tax benefits; and the inclusion of five Arab Bedouin towns in the Naqab (Negev) - Hura, Kessife, Lagiyya, Rahat, and Shaqib al-Salaam (Segev Shalom) - in the list of localities deemed eligible for such benefits. At the hearing, the Court ordered the Minister of Finance and the Attorney General (AG), the respondents in the case, to show cause as to why the law should not be cancelled.
Supreme Court Justices D. Beinisch, M. Naor and E. Hayut granted the state’s request for six months from the inauguration of the new government (following the March 2006 elections) to revise the legislation. The Court ordered the respondents to provide information about measures taken to establish clear and consistent criteria for localities to qualify for tax benefits by 1 October 2006.
Adalah Attorney Hassan Jabareen submitted the petition on behalf of the mayor of Rahat Municipality, the heads of the Hura, Lagiyya, and Kessife local councils, individuals living in the five towns, and in Adalah's own name. Adalah Attorney Marwan Dalal represented the petitioners at the Supreme Court hearing.
The objective of Amendment No. 146 is to provide tax benefits to localities in Israel which are located within seven kilometers of the Gaza Strip, in accordance with Governmental Decision No. 2633. The benefits would grant citizens of Israel in these localities a reduction of 13% in their income tax payments. In addition to excluding the five Arab Bedouin towns from the list of localities eligible for tax benefits, the Knesset's Finance Committee added three more towns and two regional councils to the list of localities eligible for income tax benefits, despite the fact that they are not located within a seven kilometer radius of the Gaza Strip. In total, the Finance Committee added 18 additional Jewish towns in the Naqab to the list. In June 2005, prior to the law’s enactment, the AG requested its withdrawal. The AG stated that, following the changes made to it by the Knesset’s Finance Committee, the proposed amendment was discriminatory and harmed the principle of equality, due to the lack of clear and consistent criteria according to which the named localities were selected for income tax benefits.
In accordance with an amendment to a 2001 tax law, seven Arab Bedouin towns in the Naqab were granted tax benefits for the first time. That amendment was passed in order to provide economic aid to localities throughout the Naqab, including the seven Arab Bedouin towns, which suffer from the poorest socio-economic conditions in Israel. In 2003, however, the Economic Recovery Law was enacted. This law revoked the tax benefits enjoyed by five of the seven Arab Bedouin towns, and at the same time included Jewish localities with a higher socio-economic status.
In the petition, Adalah argued that arbitrarily removing the five Arab Bedouin towns from the list of localities entitled to income tax benefits constitutes discrimination, since it violates the principle of equality. Since 88 localities in the Naqab and the South of Israel are entitled to income tax benefits, it is imperative that the poorest localities in the same geographic area are afforded these same benefits, Adalah contended. Moreover, Adalah argued, the amendment exacerbates the problems created by the Economic Recovery Law, which revoked the income tax benefits previously enjoyed by these towns while granting eligibility to localities with higher socio-economic ranking.
H.C. 6901/05, Mayor of Rahat Municipality, et. al. v. Minister of Finance, et. al. (case pending).