Israel may enjoy one of the lowest unemployment rates in the world, but its level of income inequality is "shocking," Harel Locker, the director general of Prime Minister Benjamin Netanyahu's office, told the annual Negev Conference Monday.

"We must strive to close the gaps between the richest and the poorest," he declared, but said that the solution would not likely come from the state budget.

"We need to cut back in 2013, even if not to the same extent as has been reported in the newspapers," Locker said.

He added that it was imperative to increase defense spending. "We need to remember that with defense we have nothing. Without investing in Iron Dome [the missile defense system], life cannot go on."

Locker also signaled a desire to reduce taxes, stating, "There is a link between direct taxes and employment. If we hurt the business sector, there are fewer jobs. We need to strike a balance between direct and indirect taxes, of course, but we need to remember that creating employment is social justice."

Avi Ben-Bassat, a former treasury director general and now a lecturer at the Hebrew University of Jerusalem, struck out at tax breaks, which he estimated cost the government NIS 39 billion in annual revenue. He said many of the breaks were only perpetuated because of lobbying pressure.

Ben-Bassat pointed to advanced-training funds, the tax breaks on which cost the budget NIS 2.4 billion annually. It is a benefit that only 37% of all wage-earners enjoy.

He also hit out at the exemption Eilat residents receive on value-added and employers taxes, as well as the tax breaks enjoyed by exporters. "The most profitable sector in Israel pays a corporate tax of 6% to 10%. What justification can there be for such a big exemption on a 25% corporate tax?" he asked.

Ben-Bassat called for higher government spending and taxes as a way of alleviating inequalities, stating, "We need a formula that increases public spending and increases taxes, but not in every area. We need to raise income taxes more and not indirect taxes. Before we raise taxes, we need to rescind some of the exemptions."