Estonia PM Calls For Review Of iGaming Tax Reduction

Estonian Prime Minister Kristen Michal has called for a review of the country’s reduction in online gambling tax, citing concerns over fiscal and budgetary pressures.

Michal has asked the Riigikogu, Estonia’s parliament, to reconsider the tax reduction introduced in December 2025 as part of the Reform-Eesti 200 budget.

The measure reduced the tax rate on licensed online casino income from 6% to 4%.

The policy was originally scheduled for review in 2028, after two years of implementation, to determine whether it had helped attract new iGaming businesses to Estonia.

However, Michal is seeking an earlier review after being informed of fiscal challenges surrounding the approval of the 2027 Budget.

“Certainly this debate will happen,” he told Estonia’s public broadcaster ERR.

“The first clear principle I stated is that culture must not lose out. We have already compensated the missing funds caused by this legislative mistake, and we must find the rest as well so that culture does not suffer.”

Tax Revenue Under Review

The reference to a legislative mistake relates to a drafting error identified at the beginning of 2026, which temporarily removed the tax obligation for certain forms of remote gambling.

The Riigikogu corrected the legislation in February, while operators were encouraged to make voluntary payments to compensate for the resulting shortfall in tax receipts.

The underlying tax reduction has also yet to produce its intended effect.

Estonia’s Finance Ministry confirmed in June that no new online casinos had entered the market since the policy was approved, although two licence applications remained under consideration.

Michal acknowledged that the tax reduction had been in place for too short a period to draw a definitive conclusion about its impact.

However, he said the government must examine the reasons behind the decline in gambling-tax receipts and whether maintaining the reduction remains fiscally sustainable.

“If tax revenue does not increase, there is no point in continuing with further tax reductions,” Michal stated.

Eesti 200 Defends Tax Reduction

The tax reduction was championed by Eesti 200, the junior partner in Michal’s minority government, and was taken through parliament by party MP Tanel Tein.

Kristina Kallas, Chair of Eesti 200 and Education Minister, defended the measure on the basis that a lower tax rate could attract international operators, broaden Estonia’s tax base and generate additional funding for culture and sport.

Supporters presented the policy as part of a wider ambition to establish Estonia as a European technology and services hub for the online gambling sector, following a model comparable with Malta.

They argued that the impact of the tax change should be assessed over several years, given the time required for licensing and relocation decisions.

The Finance Ministry had warned, however, that the reduction could result in lower gambling-tax receipts of approximately €6m in 2026, €8m in 2027, €10m in 2028 and €13m in 2029 if the expected influx of operators failed to materialise.

Michal’s Reform Party supported the legislation despite opposition from some of its MPs, who raised concerns about the financial projections and the potential risks associated with attracting additional international casino businesses.

Budget Pressures

The proposed review comes as Michal’s government seeks to balance competing demands during preparations for the 2027 Budget.

Estonia is forecasting economic growth of 2.5% in 2026, while the general government deficit is expected to reach 4.4% of GDP, above the EU’s 3% reference level.

The country has also increased defence spending to more than 5% of GDP in response to the continuing security threat from Russia.

While defence remains a national priority, the increased spending leaves less fiscal room for areas including healthcare, education, culture and other public services.

The coalition is also maintaining its proposal for a universal €700 monthly tax-free allowance, which is intended to increase household disposable income amid inflationary pressures but would also reduce government receipts.

Michal must negotiate the budget from a politically weakened position. Following the departure of two MPs from the governing parties, the Reform–Eesti 200 coalition holds 50 of the Riigikogu’s 101 seats.

Approval of the 2027 Budget is therefore expected to be an important test for Michal’s government.