Review of Estonian online gambling tax to be brought forward

Estonia’s prime minister has called for an early evaluation of the phased reduction in igaming tax amid budget shortfalls.

Estonia.- Prime Minister Kristen Michal has instructed parliament to bring forward a review of the reduction in online gambling tax in Estonia. He cited concerns over fiscal shortfalls and the difficulty of finalising the 2027 Budget. 

A phased reduction in the tax rate on licensed online casino revenue from 6 per cent last year to 4 per cent from 2029 was introduced in December under the Reform–Eesti 200 budget. The measure had been scheduled for assessment in 2028, but Michal has demanded an earlier evaluation.

“Certainly, this debate will happen,” he told state broadcaster ERR. “The first clear principle I stated is that culture must not lose out. We have already compensated for the missing funds caused by the legislative mistake, and we must find the rest as well so that culture does not suffer.”

The legislative mistake he referred to was a drafting error that temporarily removed tax obligations for online casino gambling completely. The intention was to cut the tax rate by half a percentage point each year, with the rate from April 2026 falling to 5.5 per cent. However, mention of “games of chance” was inadvertently left out of the wording of this year’s provisions. Parliament corrected the law in February, and operators agreed to make voluntary payments to cover the unintended gap.

However, the policy so far appears not to have achieved its intended effect of attracting more investment – Estonia has yet to show signs of becoming a new Malta. The Finance Ministry confirmed in June that no new online casinos had entered the Estonian market since the policy was enacted, although two licence applications remain under review.

Michal admitted the measure has been in force for too short a period to reach firm conclusions, but stressed the need to examine why gambling-tax receipts are falling and whether maintaining the lower rate is fiscally viable. “If tax revenue does not increase, there is no point in continuing with further tax reductions,” he said.

The initiative was championed by Eesti 200, the junior partner in Michal’s coalition, and driven through parliament by MP Tanel Tein. Party chair and Education Minister Kristina Kallas defended the proposal, arguing that a lower rate could attract international operators, broaden the tax base and provide additional funding for culture and sport. Michal’s Reform Party backed the legislation despite dissent from some of its own MPs, who questioned both the projections and the risks of encouraging more international casino businesses.

Supporters continue to insist that the impact of the measure can only be judged over several years, given the time required for licensing and relocation decisions. However, the Finance Ministry had warned that the reduction could lower receipts by around €6m in 2026, €8m in 2027, €10m in 2028 and €13m in 2029 if the expected influx of operators failed to materialise.

The Prime Minister’s intervention comes as his government struggles to balance competing priorities in the 2027 Budget. Estonia projects economic growth of 2.5 per cent in 2026 but expects a government deficit of 4.4 per cent of GDP, above the EU’s 3 per cent reference level. Defence spending has been raised to more than 5 per cent of GDP in response to the Russian threat, leaving less fiscal space for healthcare, education and culture.

The coalition is also pressing ahead with a landmark reform to introduce a universal €700 monthly tax-free allowance. While designed to boost household income against inflation, the measure will reduce state revenues. Meanwhile, the Reform–Eesti 200 coalition now holds just 50 of the Riigikogu’s 101 seats after two MPs departed.