Estonian Prime Minister Kristen Michal has ordered a review of the country’s online gambling tax reduction two years earlier than planned, after the cut delivered no new licensed operators and left the state facing a forecast €6 million shortfall in gambling tax receipts this year.
The Riigikogu, Estonia’s parliament, approved the amendment to the Gambling Tax Act in December 2025. It lowers the rate on remote gambling revenue in stages from 6% to 4%, with the first step setting the rate at 5.5%. Lawmakers built a review into the plan for 2028, two years after the measure took effect. Michal wants that assessment brought forward to this year, while the government finalises the 2027 budget.
“Certainly this debate will happen. The first clear principle I stated is that culture must not lose out.”
He set a condition for the second stage of the cut.
“If tax revenue does not increase, there is no point in continuing with further tax reductions.”
Michal also acknowledged that the measure has been “in force for too short a period to reach a definitive conclusion”.
No new operators so far
The argument for the reduction was that a lower rate would bring international online casino operators to license in Estonia, widening the tax base enough to offset the lower rate. No new online casino has entered the Estonian market since the law passed. Two licence applications are under consideration.
The Ministry of Finance forecast that the reduction will lower gambling tax receipts by €6 million in 2026, €8 million in 2027, €10 million in 2028 and €13 million in 2029 if the operator base does not grow. The bill’s initiators disputed those projections during the parliamentary debate.
Estonian gambling tax revenue is earmarked for culture and sport, which is what makes the shortfall politically difficult. Receipts fund the Cultural Endowment of Estonia and planned sports infrastructure, including a proposed multifunctional arena in Tallinn with more than 10,000 seats.
A drafting error removed the tax for two months
The reduction’s first months did not run cleanly. The legislation passed on 3 December 2025 contained a wording error that removed the legal basis for taxing remote gambling when it came into force on 1 January 2026. Operators had no obligation to pay for the period that followed.
The Riigikogu voted on a corrective amendment on 10 February 2026, and the finance committee set the effective date at 1 March 2026 to match monthly taxation periods and existing IT systems. The corrected law applies 5.5% uniformly to remote games of chance and skill games.
“It’s very embarrassing. A lot of politicians have answered questions on ‘how can this happen?'”
That was Karolina Ullman, partner at Njord Law Firm, on the political fallout. On the revenue lost in the gap, she was direct.
“The law is the law. If there is no legal ground to collect tax, you cannot demand tax payment.”
The coalition split
Eesti 200 has been the reduction’s main backer. MP Tanel Tein steered it through parliament, and party chair Kristina Kallas, who serves as education minister, argued that the lower rate would attract international operators and broaden the tax base. Some MPs from Michal’s Reform Party questioned the revenue projections and the risk of building budget lines on online casino business.
The parliamentary arithmetic is tight. The coalition holds 50 of the Riigikogu’s 101 seats after two MPs left, which gives a small group of dissenting MPs real weight on any vote to change the schedule.
What Estonia was competing for
The 4% target was set against the rates charged by established European licensing bases. Estonia has a small domestic player pool, so the tax rate is one of the few terms it can change to compete for operators that could license elsewhere in the European Union. Malta is reworking its own gambling VAT and gaming tax from October 2026, and a separate EU-level tax proposal is moving in Brussels, so the comparison Estonia was pricing against is itself changing.
Tallinn’s gambling sector has also been contracting on the land-based side, with Bombay Group cutting more than half its Tallinn staff in a casino restructure earlier this year.
What happens next
The review will report while the 2027 budget is being assembled, which sets up a direct comparison between an €8 million forecast loss next year and the operator interest the cut has produced. The two pending licence applications are the immediate test. If neither converts into an operating licence before the review concludes, Michal’s stated condition for continuing the reduction is not met, and the step to 4% becomes a question for a coalition with a one-seat working margin.
Source: Government of the Republic of Estonia
