Estonia reconsiders online gaming tax cuts after revenue shortfall

Estonia’s Government is reconsidering a planned reduction in the online casino tax after the measure failed to attract new operators or generate the expected additional tax revenue. Instead, the state budget has faced a shortfall of several million euros. Prime Minister Kristen Michal announced that the Government will now discuss whether further tax cuts make sense.

However, Michal mentioned it might still be too early to determine whether the tax cut has attracted more online casinos.

Nevertheless, he stated: "Certainly this debate will happen. The first clear principle I stated is that culture funding must not lose out. We have already compensated the missing funds caused by a previous legislative mistake, and we must find the rest as well so that culture does not suffer."

The Estonian Parliament adopted the 2026 state budget on 10 December 2025, with the changes taking effect on 1 January 2026. The amendments to the law were intended to reduce the online gambling tax rate from 6% by 0.5 percentage points each year until it reached 4%.

Separately, a drafting error in the regulations unintentionally exempted online casinos from their tax obligations at the beginning of this year. Lawmakers subsequently amended the law to close the loophole, with the new provisions taking effect in early March.

By mid-March, online gambling operators had voluntarily paid more than €1.4m in tax following the loophole. Based on operators’ reported income for January and February, the estimated tax liability for online gambling had been approximately €3.5m ($4.1m).

However, the Government’s decision to reconsider the planned tax reduction appears to be separate from the temporary tax loophole. The broader concern is that the tax cut might fail to deliver its intended objective of attracting new online gambling operators to Estonia. The original policy aimed to make Estonia a more attractive hub for online gambling operators, similar to Malta.