Inside Estonia's recent Gambling Act Changes That Seem to Spark One Controversy After Another

Estonia has long been known as one of the most business-friendly countries in the world. Its e-Residency program has attracted more than 134,500 individuals to date, all of whom have founded over 39,300 companies and generated more than €400 million in cumulative revenue.

With a population of roughly 1.3 million, the country has been facing several challenges in recent years: an ageing and decreasing population, high inflation, labor shortages, and housing affordability. In an effort to make the country more attractive to international businesses, Estonia has recently unveiled a set of new policies.

While some of them were adopted quietly and easily, others have created quite a buzz. Let’s be honest, it’s not every day that a legislative error exempts online casinos from paying gambling tax and leads to the country losing millions in tax revenue. But what exactly happened?

How Estonia’s gambling landscape has recently changed

In 2024, in an attempt to increase public revenue and offset budget pressures caused by wider fiscal reforms, Estonia introduced a gradual tax increase for the remote gambling and betting sector: a 1% increase from 5% to 6% in 2024, followed by a second 1% increase from 6% to 7% in 2026.

While the first increase went ahead as planned, Estonia dramatically shifted its broader economic strategy to become more competitive on the international market and made the decision to revamp its gambling taxation system (again).

Under the revised policy, a 0.5% reduction in the online gambling tax over the next 5 years would lower the tax burden from 6% to 4% (a significant change to the original tax increase), which has caused great turmoil among the Estonian government and population alike.

With a 51–31 vote in favor of the reform, however, the policy gained enough support from proponents who believed the new law will help modernize the country, increase Estonia’s competitiveness, and attract international companies operating in the iGaming sector – all of which would ultimately close the financial gap over time.

However, gambling taxes have long been the primary source of funding for cultural events in Estonia. Fewer taxes collected means less funds available, a situation devastating for a country where sports and culture play a major role. As a result of the new policy, the state will have approximately €13 million less to spend on cultural events over the next three years – a number that cannot be ignored.

The legislative error that made things worse

At the beginning of the year, a legislative error that exempted online casinos from the gambling tax was uncovered. What was supposed to be a simple adjustment of tax numbers turned out to be a disaster no one foresaw. "Games of chance and remote gambling were left out of this year's taxation, meaning online casino games are not being taxed in 2026," said Finance Committee member Aivar Kokk (Isamaa) when informing the Estonian news outlets about the issue. According to Kokk, this is the first time during his 12 years in the Estonian parliament that she has encountered such an incident.

The situation was serious: each month, the state was losing €2 million. After what must have undoubtedly been a grueling set of weeks for the Estonian government, an amendment fixing the error was introduced in mid-February by MP Tanel Tein.

The amendment reintroduced a 5.5% tax for online casinos from March 1, reinstating funding for sports and culture, which has been heavily impacted by the error. But while new online casinos in Estonia no longer have to be mindful of this error due to the recent fix, this doesn’t return the money back to the state’s pockets.

A surprising twist of events

While one might think that the state must now come to terms with the fact that it lost 2 months’ worth of gambling tax revenue, that couldn’t be further from the truth. It turns out that several of the established gambling companies want to contribute voluntarily anyway, realizing that taking advantage of short-term legislative errors rarely leads to long-term benefits.

With reputation being the biggest driver for the voluntary contribution, online casinos have donated roughly €500,000 (€637,000 with income tax included) to the state so far – a far cry from the projected lost revenue of €2 million.

Of the eight companies that donated, only one is foreign. Since most of the gambling tax revenue comes from foreign companies, this creates an unfortunate situation where most of the revenue is lost due to the nature of the donations. However, out of the 41 remote gambling operators in Estonia, 14 belong to the Estonian Association of Gambling Operators. While the association pledged to make a voluntary donation in January, the numbers do not seem to reflect that.

"Just over a quarter has been voluntarily donated. Life generally shows that everyone is much more enthusiastic about making promises than later fulfilling them,” said Evelyn Liivamägi, deputy secretary general for financial and tax policy, when asked about the situation.

Companies have until the end of the year to make donations. As a result, the full impact of the error will only come to light in 2027, when the final losses will be assessed and calculated. However, Liivamägi believes most companies will make their donations by the end of the first quarter, which is when the tax would normally be paid. Because of this, the state expects to have a rough estimate of the losses calculated by the beginning of April.