Black and Arab Sephardic Jews do face discrimination inside Israel from some Ashkenazi Jews, but none of this discrimination is encoded into law (such as happened in South Africa).

Racism is a problem in every country in the world (with the possible exception of Japan which has a mono-culture of Japanese).

The Israeli govt. has instituted programs to try to re-educate people away from racist attitudes.

Black and Arab Jews are NOT internal refugees. They don't live in camps. They are full citizens and have full citizenship rights.