Israel is one of the countries with the severe water shortage, the most complicated water tax system and the best implementation effectiveness. By systematically investigating and analyzing the establishment principles, legal protection, structural design and tax collection measures of the water tax system in Israel, the experience in legal protection, tax design, tax allocation and compensation use of agriculture water resources is analyzed and summarized. On this basis, some suggestions for improving the system and practice of compensation use of water resources in China are proposed so as to provide reference for promoting tax reform of water resources in China.