Key Moments:
- The Estonian parliament approved a gradual online gambling tax cut from 6% to 4% on October 21 with 48 votes in favor and 18 against.
- The government expects annual gambling tax revenue to rise from €22 million to €30 million by 2028, subject to new operator entries.
- Critics warn of possible budget shortfalls, projecting losses of €6 million in 2026, €8 million in 2027, and €10 million in 2028 if reductions proceed.
Legislative Shift and Rationale
Estonia’s government has officially enacted changes to the Gambling Tax Act, aiming to lower the online gambling tax rate progressively from 6% to 4%. The legislative amendment, approved on October 21 after securing 48 parliamentary votes in favor and 18 against, deviates from previous intentions to raise the tax rate to 7% the next year.
Authorities argue that this policy change will help attract international online gambling operators and establish a more predictable source of funding for sports and cultural initiatives. The new approach aligns with Estonia’s ambitions to compete internationally, particularly with Malta, in the gambling tourism space.
Revenue Projections and Mechanism
Foreign Minister Margus Tsahkna announced that the government forecasts an increase in annual tax receipts from €22 million to €30 million by 2028, contingent upon the arrival of new market participants. Tsahkna explained that all gambling tax revenue will be allocated exclusively to the sectors of culture and sports.
According to the new plan, the tax rate will decrease by increments of 0.5% points, with each reduction dependent on meeting specific benchmarks such as €27 million in revenues. The legislative framework includes safeguards that allow the government to pause further reductions if revenue expectations are not met.
Criticism and Political Debate
The decision to reduce the online gambling tax rate has sparked criticism, notably from former finance minister Mart Võrklaev of the Reform Party. Võrklaev labeled the timing as unfavorable and warned of risks to public finances. He referenced Ministry of Finance projections indicating possible losses of €6 million in 2026, €8 million in 2027, and €10 million in 2028 should the tax cuts be enacted.
Võrklaev challenged the expectation that a lower tax rate will attract substantial numbers of new operators, arguing that nine new companies entered the Estonian market after the 2023 tax rate increase, generating an additional €4 million per year. In an interview with Eesti Ekxpress, he stated:
“The new scheme is based on the assumption that lowering the tax will bring a large number of gambling operators to Estonia. But after we decided to raise the tax in 2023, nine new operators still entered the market. That brought in €4 million per year.”
“The forecast expecting a massive influx of gambling operators is built on shaky ground.”
Official Response and Future Outlook
Foreign Minister Margus Tsahkna dismissed the objections, describing them as politically motivated. Tsahkna asserted that the government’s strategy is data-driven and cited accurate forecasting during Võrklaev’s tenure as precedent for current projections. He characterized the tax reduction as a responsible move towards a sustainable funding framework for Estonian culture and sports.
Prime Minister Kristen Michal also defended the tax decrease, referencing previous skepticism towards Estonia’s corporate income tax reforms that later resulted in considerable economic expansion. According to ERR reports, Michal said:
“That was a project marked by a minus sign. People said the calculations showed that no revenue would come in and that the economy would collapse,” he stated, according to ERR reports.
“If I remember correctly, in the following years, profits grew ninefold, tenfold, elevenfold. In reality, it all came out of the shadows and the Estonian economy gained momentum.”
Michal argued that priority should be given to attracting licensed operators to Estonia rather than focusing solely on player activity. He also indicated upcoming enhancements to the Financial Intelligence Unit (FIU) for oversight purposes.
Strategic Vision for a Competitive Gambling Hub
The tax reduction forms part of a strategy spearheaded by Madis Timpson, a Reform Party MP and chair of the Riigikogu’s Legal Affairs Committee. Timpson has advocated for positioning Estonia as a “remote gambling paradise,” expressing hope that companies with bases in Malta may consider relocating to Estonia, thereby boosting investment in the nation’s technology-oriented gambling market.
Tax Rate Reduction Timeline and Revenue Projections
| Year | Expected Tax Rate (%) | Projected Revenue Loss (€ millions) |
|---|---|---|
| 2026 | N/A | 6 |
| 2027 | N/A | 8 |
| 2028 | N/A | 10 |
Revenue increase from €22 million to €30 million by 2028 is contingent on successful market expansion as outlined by government officials.
- Author
Daniel Williams
