Opposition parties and the Estonian Finance Ministry remain critical of the upcoming gambling tax cut bill, which aims to reduce the levy from 6% to 4% in 2029. In September, a faction of ministers from Estonia’s ruling coalition government presented the draft bill at the Riigikogu (Estonian Parliament). The bill aims to promote the ease of doing business in Estonia and hopes to attract gambling operators eyeing Malta as their base of operation.
Estonian Lawmakers Question the Efficacy of Lowering Gambling Taxes: Key Insights
- Ministers from the Eesti 200 and the Reform Party, drafters of the bill, claim that cutting gambling taxes will encourage operators to set up operations in Estonia. Thus, boosting revenue in the long run.
- Opposition ministers and the Finance Ministry remain sceptical about the actual benefits of lowering the tax rates. They claim the new bill will reduce overall tax revenue in the next fiscal year.
- Estonian authorities are aware of the potential dangers of unregulated online gambling, including the risk of money laundering and gambling harm. Lawmakers plan to amend the Gambling Act to improve oversight.
Estonian Ministers Oppose Gambling Tax Cut
In September, MPs from Eesti 200 and the Reform Party submitted a draft bill to the parliament to reduce gambling taxes from 2029. However, opposition ministers are sceptical about its proposed benefits. They claim the amendments to the Gambling Tax Act will reduce the annual tax revenue from remote gambling operations, leading to a fiscal deficit rather than boosting the nation’s economy.
The growing popularity of remote casinos has led to a shift in global perspective. Lawmakers today are evaluating ways to harness the economic potential of online casinos. Europe is at the forefront of the change, with online casinos in Finland, Germany, Spain, etc., continuing to break stereotypes about gambling harm and criminal activities.
The EU’s gambling regulatory framework has evolved over the past several years. Modern remote gambling operators, providers, and stakeholders in the regulated industry are working together with law enforcement to ensure compliance. Estonian lawmakers want to capitalise on this trend, encouraging operators to bring their business to the country.
Estonian ministers remain divided on this subject. Centre Party MP and Deputy Chair of the Riigikogu Finance Committee Andrei Korobeinik noted that it was cynical to reduce taxes on foreign companies at a time when tax burdens are increasing for the domestic population.
Korobeinik said:
Looking at the overall picture, Estonia is currently competitive in terms of this tax rate. Investors, regardless of the sector, tend to look at whether the environment is stable and attractive for investment, and recent years’ policies have certainly not encouraged that.
Korobeinik’s observations paint a contradictory picture in which gambling revenue does not increase after the proposed tax cuts. However, this scepticism is not limited to opposition members. Several ministers and non-political supporters of the government have also voiced their concerns.
Estonian Lawmakers Propose Reducing the Tax Rate by 0.5% Annually until 2029
Highlighting the ideal situation in which Estonia would benefit from a tax cut, Evelyn Liivamägi, Deputy Secretary General of Estonia’s Ministry of Finance, said that new operators must enter the market annually to offset the impact of the lower tax rate.
Evelyn noted:
In our assessment, tax revenues are more likely to decline. To collect as much as currently forecast in the state budget strategy, at least 10 new operators would need to enter the market each year and pay as much tax as the average gambling organiser has been doing so far.
She went on to explain the other burdens that the tax cut will create for the Tax and Customs Board and the Financial Intelligence Unit.
Evelyn continued:
Alongside this tax rate reduction bill, there is also an amendment to the Gambling Act under progress at the Riigikogu, which will strengthen the oversight of gambling operators. The tax change will therefore bring additional work for the Tax and Customs Board (EMTA) and the Financial Intelligence Unit.
The first reading of the amended Gambling Tax Act was held at the Riigikogu on Tuesday, October 21. The draft bill aims to reverse the proposed gambling tax hike in the upcoming fiscal year to 7%, instead lowering the base tax rate by 0.5% annually until 2029. This will effectively reduce the tax bracket from 6% to 4%.
Supporters of the bill argue that lower taxes, coupled with favourable regulations, will encourage gambling operators to establish their business in Estonia. The additional tax revenue, forecasted by the bill proponents, would be used to fund domestic initiatives, including sports, culture, and community development.
Eesti 200 MP Tanel Tein, a member of the Finance Committee, supported the tax cut. He claimed that increasing the tax rate any further would discourage foreign companies from bringing their business to Estonia, in turn lowering tax revenue. The proposed tax incentives, on the other hand, would play a key role in promoting Estonia as a paradise for conducting remote gambling operations.
Tanel stated:
If we hike the tax further, remote gambling operators may leave the Estonian market, which means our current state budget forecast could decrease. Many things might go undone, and within two years, we’d just return to the same level where Estonia has always been — around five percent. We’re moving toward four percent as a signal to the sector that Estonia is once again worth considering.