This research analyzes the fiscal tool of tax benefits and examines the ten most costly benefits in Israel in order to help policymakers and the public better understand the government’s involvement in economic activities, its allocation of the budget and the implications of changes in direct and indirect taxation policies on the Israeli citizen.

The detailed examination of the 10 largest tax benefits, estimated in 2015 at approximately NIS 43.2B, reveals that Israel’s issues with tax benefits are particularly severe. The analysis provided in this paper indicates that the default in Israel’s tax benefits’ case is to preserve the existing exemptions, even when there is no socio-economic justification, and even when the benefits are not found to be an effective tool for the designated purpose.