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Combatting climate change is among the most critical issues on the global policy agenda. The transition towards a greener economy will require a pivot towards more sustainable production processes and consumption patterns. Entrepreneurs have the potential to be a major driving force behind this effort through their capacity to develop and propagate innovative green solutions. To unlock this potential, it is crucial for policy makers to implement appropriate policies and measures that enable green entrepreneurs to thrive. This report identifies lessons from international policy practices in stimulating and supporting green entrepreneurship from three case study countries – Canada, Germany and Israel – to inform Denmark about effective policy practices and pitfalls to avoid as it implements initiatives to strengthen its green transition. Recommendations are offered across a number of areas such as promoting greater co-ordination between relevant policy actors, strengthening specialised support for green entrepreneurs and building green markets.

This report provides a comprehensive analysis of the Israeli system of local government finance, with a focus on the role of the Israeli property tax, known as the Arnona. Local governments are financed through a combination of revenue, primarily from central government grants and from the Arnona, which is levied on residential and non-residential land and buildings but is based on their physical size rather than their value. The first chapter provides a description of the Israeli system of local government finance and compares it to local government finance in OECD countries. Using standard criteria for the evaluation of taxes, the second chapter assess the strengths and shortcoming of the Arnona and the intergovernmental grant system. Attention is paid to fiscal disparities among municipalities and to the ability of the current system to provide all Israelis with adequate and equitable access to economic and social services and infrastructure. The final chapter presents a set of 13 policy recommendations divided between proposals for improving the existing Arnona system and a longer-run blueprint for a more substantial reform of the system of local government finance in Israel based on the establishment of a value-based system of local property taxation.

This report analyses the pay system in Israel’s public sector, and provides recommendations to align it with the strategic priorities of the government. It recommends ways to simplify job classification and better match pay to market rates, particularly in areas where the public sector has trouble competing for talent. It also identifies opportunities to better reward performance, productivity and job responsibilities. In Israel, no pay reform is possible without the agreement and active collaboration of public sector unions, and so the second part of this report focuses on public sector labour relations and makes recommendations to improve the functioning of the collective bargaining process in Israel’s public sector. This report contributes to the ongoing work of the OECD’s Public Employment and Management working party, to support the implementation of the Recommendation of Council on Public Service Leadership and Capability.

This paper examines the taxation of housing in Israel, and proposes a set of reforms to improve the efficiency and fairness of the current system. Israel’s housing tax system faces similar problems to those of many other OECD countries. In particular, a bias arises in favour of owner-occupied property relative to rented property due to the non-taxation of imputed rents and most capital gains. That said, unlike many OECD countries, Israel taxes some owner-occupied capital gains (above a generous threshold) and generally does not allow mortgage interest relief for owner-occupied properties, reducing the extent of the distortion more than in many countries. As with most OECD countries, Israel levies highly distortionary transaction taxes, although a zero-rate band significantly limits the number of owner-occupied house purchases subject to the tax. Additionally, Israel’s recurrent property tax (the Arnona) faces a number of design problems, while the tax rules for rental income are complex and subject to significant tax evasion. To address these concerns, a reform package is proposed that involves a gradual and broadly revenue-neutral shift away from transaction taxes towards recurrent taxation of residential property, via increases in both the recurrent property tax and rental income taxation. The redesign of the recurrent property tax from an area-based to a market value-based tax is also proposed, as are a number of more technical reforms.

Under Action 14, countries have committed to implement a minimum standard to strengthen the effectiveness and efficiency of the mutual agreement procedure (MAP). The MAP is included in Article 25 of the OECD Model Tax Convention and commits countries to endeavour to resolve disputes related to the interpretation and application of tax treaties. The Action 14 Minimum Standard has been translated into specific terms of reference and a methodology for the peer review and monitoring process. The peer review process is conducted in two stages. Stage 1 assesses countries against the terms of reference of the minimum standard according to an agreed schedule of review. Stage 2 focuses on monitoring the follow-up of any recommendations resulting from jurisdictions' Stage 1 peer review report. This report reflects the outcome of the Stage 2 peer monitoring of the implementation of the Action 14 Minimum Standard by Israel.

Despite being one of the smallest countries in the OECD, Israel is marked by significant socio-economic disparities, which have a clear spatial dimension. Ethnic and religious groups with weak socio-economic outcomes are not benefitting from the thriving high-tech sector in the centre of the country. As a result, there is a persistent lack of employment opportunities in the peripheral areas alongside skills shortages in the dynamic centre. Inequalities between municipalities are the highest in the OECD. Moreover, the current pandemic has hit poorer Haredi neighbourhoods particularly hard. The government should reduce barriers that prevent segments of the population from fully participating in the economic process and give everyone a similar chance to succeed, regardless of where he or she was born. This will require equal access to high-quality education, affordable housing, reasonable public transportation and improved urban planning in every municipality to reduce spatial divides and segregation of disadvantaged households. Local authorities can play a significant role, since good municipal government and effective policies to achieve national priorities are the best means to improve the outcomes of residents of poor areas.

Israel’s tax mix is reasonably growth- and employment-friendly. Nonetheless, tax reform is needed to foster an inclusive recovery from the COVID-19 crisis and help tackle Israel’s main economic and societal challenges of high poverty, including among those in work, and slow aggregate productivity growth. The earned income tax credit has been an effective tool to reduce poverty and increase employment among the low-skilled and could be further expanded. The business tax system provides large benefits that aim to incentivise companies to become more productive, but the existing design may create distortions. This preferential tax treatment should be reviewed with a view to better targeting the scheme to ensure net benefits to society. There is also scope to simplify the tax system by removing inefficient tax expenditures and better leverage Israel’s impressive technological capacity to further lower compliance costs and reduce tax evasion. Finally, excise taxes should be adjusted, including by taxing carbon more heavily, to improve environmental and health outcomes.