The High Court of Justice on Wednesday ruled that the state's issue of tax benefits to Israeli citizens based on their place of residence was inequitable and discriminated against certain sectors of society, particularly Arabs.

Supreme Court president Dorit Beinisch, Justice Eliezer Rivlin and Justice Asher Grunis questioned the legality of these benefits, as no Arab community has been included as a recipient of the benefits.

"The government and the Knesset systematically refrained from resolving this issue, contrary to the position of the attorney general," the judges wrote in their decision.

The High Court's decision follows a petition placed by the Association for Civil Rights in Israel (ACRI), Adalah, the Legal Center for Arab Minority Rights in Israel and 20 communities regarding the amendment to the income tax bill, which instituted tax cuts for a number of communities, without clear and objective criteria for the benefits, resulting in the discrimination of Arab communities.

In 2005, Adalah and ACRI submitted a petition against the discriminatory amendment. The amendment was initially intended for the communities surrounding the Gaza strip, but, the petitioners claimed, due to political considerations other communities were added as tax benefit recipients. According to the petitioners, providing substantial tax benefits without evident criteria contravenes the right to equality.

President Beinisch wrote in the court decision that since the last hearing in December 2009, there has been no legislative change whatsoever.

"Knesset members and ministers are free to act according to political considerations… in social and economic issues. However, this freedom is not absolute, and should be limited, especially when it jeopardizes fundamental rights such as the right to equality," Beinisch wrote.

Following the court's decision, Sawsan Zaher of Adalah said that court determined that "the law which provides benefits to certain communities is in fact discriminatory.

"This is an important decision for social and economic equality," Zaher said.