Israel Launches Pilot Program to Compensate Businesses for Extortion-Related Damages

The Israel Tax Authority has launched a pilot program to compensate business owners who have suffered damages due to extortion, commonly known as "protection" rackets. This initiative, stemming from Government Decision 4299, allows eligible business owners to file claims for direct damages to their property or homes incurred between September 24 and November 23, 2026, as a result of refusing to pay extortion fees or filing a police complaint.

To qualify for compensation, businesses must be legal, possess a valid operating license, and have an active file with the Tax Authority. The damages must be direct and affect business assets like structures, inventory, or equipment, or the owner's residence. Crucially, a police complaint related to extortion must have been filed and recognized as such. Additionally, applicants must demonstrate that they could not obtain insurance coverage for malicious damage, even if previously insured for it, or that their claim was denied. Compliance with risk reduction measures and insurance requirements is also mandatory. For structural damage, proof of lawful construction is required.

Claims must be submitted online to the Tax Authority's compensation fund within seven days of the damage occurring. It is imperative not to repair the damage before filing the claim and allowing a property tax assessor to inspect it, as unauthorized repairs could jeopardize the claim. Temporary measures like replacing broken glass are permitted. The compensation covers direct damages only, up to a maximum of NIS 2 million, and does not include indirect losses or third-party damages. Claim processing is expected to take up to eight months.

This compensation scheme is part of a broader state effort to combat the growing problem of protection rackets, which have become a significant issue for small businesses in Israel. These rackets involve criminal organizations demanding regular payments from businesses for "protection," with threats of property damage or arson for non-compliance. The problem has been exacerbated by sophisticated collection methods, sometimes involving seemingly legitimate security companies. The government hopes that by offering compensation, more victims will be encouraged to report these crimes to the police, rather than succumbing to the demands.