Yes, there are limitations to what a person who did not serve in the IDF (or do sherut leumi, in the case of women) can work at. But those limitation are becoming less and less. At one time, one could not be hired by the govt (which controlled many jobs), and many other sectors.
Today, there are few sectors in which someone who has not served can work. Many of them are security-related, of course.
However, in many cases, someone who has served will get preference over someone who has not (all other qualifications being equal). Again, this depends on the job sector. In private business, one can hire who one likes, as long as the person is a citizen or legal resident with the correct type of visa. Many private businesses will still prefer people who have served, of course. But by no means all.
{Note on military service: I find the situation strange. For years, the only men who did not serve were the hareidim and those with criminal records. (There were times when the IDF would not take soemone who did not finish high school or the equivalent.) During the time of Raful’s tenure as Chief of Staff, he instituted the program of “noar Raful” in which even youths with criminal records were drafted. Raful’s theory was that the IDF’s job, in addition to defending the country, was to provide a basis for socialization–so that people from all sectors of society could meet each other and interact. Subsequent Chiefs of Staff have felt differently–that the IDF’s only job is to defend the country, and anything else simply distracts form the main effort. Currently, we are somewhere in the middle between those 2 views, but leaning toward Raful.
So the major sector of non-servers was the hareidim. Then, with the rise of the “me generation”, one saw disaffected childern of the Israeli artisitc elite, who avoided service, and were proud of it. There were not many of these folks. The most famous is Aviv Gefen, who is a musician. This kind of legitimized nonservice in the eyes of many Israelis. However, they are still a small minority, and most Israelis still regard nonservice with disdain-whoever is not serving–Hareidi or disaffected youth–it does not matter.}
As far as tax exemptions go, of course they are not framed as “for frum people”. How can a bureaucrat tell who is frum? So the laws (some national, some municipality) are framed according to number of children, or if the father learns in kollel (the latter, of course, limiting the discounts to frum people.)
REgarding bituach leumi–those frum folks (not all chareidim by any means) that refuse to pay do so on ideological grounds. No other sector gets that privilege. This may be because the govt does not want to take the trouble to fight it.