Estonia PM calls on review of iGaming tax reduction

Prime Minister Kristen Michal has ordered a review of the reduction in income from online gambling in Estonia, due to concerns on fiscal and budgetary shortfalls. Michal tasked the Riigikogu (parliament) with re-evaluating the tax reduction sanctioned in December 2025, as part of the Reform-Eesti 200 budget. The reduction saw the rate on licensed online casino income dropped from 6% to 4%. The measure was due to be reviewed in 2028, following two years of its application, to assess whether it had a positive impact on Estonia’s objective of attracting new iGaming businesses to domicile in the Baltic nation and EU member state. Yet, PM Michal seeks an early review of the tax reduction, as he has been informed of fiscal challenges to complete and authorise the 2027 Budget. “Certainly this debate will happen,” he told Estonia 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.” The legislative mistake concerned a drafting error discovered at the beginning of 2026 that 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 missing receipts. Separately, the underlying tax reduction has yet to deliver its intended results. 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. PM Michal acknowledged that the measure has been in force for too short a period to reach a definitive conclusion. Nevertheless, he said the government must examine why gambling-tax receipts have fallen and whether continuing the reduction remains fiscally responsible. “If tax revenue does not increase, there is no point in continuing with further tax reductions,” Michal stated. Eesti 200 blamed for deduction The tax reduction was championed by Eesti 200, the junior partner in Michal’s minority government, and led through parliament by party MP Tanel Tein. Eesti 200 Chair and Education Minister Kristina Kallas defended the proposal on the grounds that a lower rate could attract international operators, expand the country’s tax base and provide additional funding for Estonian culture and sport. Its supporters presented the measure as part of a broader ambition to establish Estonia as a European technology and services hub for the multi-billion-euro online gambling sector mirroring the economy of EU member state of Malta. They maintained that the policy’s impact could only be judged over several years because licensing and relocation decisions take time. The Finance Ministry, however, had warned that the reduction could lower gambling-tax receipts by approximately €6m in 2026, €8m in 2027, €10m in 2028 and €13m in 2029 if the anticipated influx of operators failed to materialise. Michal’s Reform Party supported the legislation despite opposition from some of its own MPs, who questioned both the financial projections and the risks associated with attracting more international casino businesses. Estonia’s do-or-die budget The intervention comes as Michal’s government attempts to reconcile competing demands within the 2027 budget. Estonia forecasts economic growth of 2.5% in 2026, but expects the general government deficit to reach 4.4% of GDP, exceeding the EU’s standard 3% reference level. The country has also raised defence expenditure to more than 5% of GDP in response to the continuing security threat from Russia. Although regarded as a national priority, the commitment leaves less fiscal room for healthcare, education, culture and other public services. The coalition maintains its bold proposal to introduce a universal €700 monthly tax-free allowance – the first by an EU nation.. The reform will increase disposable household income against inflation pressures, but will take a direct hit on receipts. Of significance PM Michal must also negotiate the budget from a politically weakened position. Following the departure of two MPs from the governing parties, the Reform–Eesti 200 coalition controlled only 50 of the Riigikogu’s 101 seats. Sign-off on the Budget is viewed as a critical test for Michal’s premiership.