Estonia’s government is preparing to reassess a reduction in online casino taxation after the measure failed to produce the expected increase in gambling tax revenue.

Prime Minister Kristen Michal said the government will revisit the policy during discussions on the state budget and fiscal strategy. The tax reduction lowered the rate applied to licensed online casinos from 6% to 4% over a two-year period, with lawmakers hoping that a more competitive rate would encourage additional operators to register in Estonia.

The expected growth has yet to materialize, while gambling tax income has fallen short of forecasts. Michal said the government must determine whether maintaining the lower rate remains justified if it does not generate additional revenue.

“Certainly this debate will happen. 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,” he said.

Tax Reduction Faces Early Review

The original legislation, approved by the Riigikogu in December, was scheduled for a later evaluation after two years of implementation. The review was intended to measure whether the lower tax rate helped Estonia attract new online gambling operators and expand its tax base.

Michal has now called for an earlier assessment because the government is facing budget pressures while preparing future financial plans.

The policy was introduced through the Reform-Eesti 200 coalition, with Eesti 200 MP Tanel Tein leading the parliamentary process. Supporters argued that a reduced tax rate could bring international online casino companies to Estonia and increase future state income.

However, the Finance Ministry previously warned that the measure could create significant budget gaps if new operators did not enter the market. Forecasts estimated gambling tax revenue losses of €6 million in 2026, €8 million in 2027, €10 million in 2028 and €13 million in 2029.

The ministry’s concerns have gained attention after no new online casinos entered the Estonian market following the approval of the tax change, although two licence applications remained under review.

Michal said the government still needs more information before making a final decision because the measure has only been active for a limited period. Officials are examining why gambling tax receipts have declined and whether the policy achieved its intended purpose.

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

Budget Pressure Increases Government Concerns

The tax debate comes as Estonia prepares its 2027 budget amid wider financial challenges. The government expects economic growth of 2.5% in 2026, while the general government deficit is forecast to reach 4.4% of GDP.

Estonia has also increased defence spending above 5% of GDP due to security concerns linked to Russia. The higher allocation has reduced flexibility for other areas of public spending, including culture, healthcare and education.

The government has already addressed some of the financial impact from the gambling tax change. A separate drafting mistake temporarily removed tax obligations for certain forms of remote gambling at the beginning of 2026. The Riigikogu corrected the issue in February, and operators were encouraged to make voluntary payments covering missing amounts.

Michal emphasized that protecting cultural funding remains a priority during the budget process.

The online casino tax reduction received criticism from some coalition members before its approval. Opponents questioned whether attracting additional operators would offset the immediate loss of tax revenue.

Eesti 200 defended the measure, arguing that a lower rate could strengthen Estonia’s position in the European online gambling market and eventually create additional funding opportunities.

The party compared the approach with other European jurisdictions that have developed large gambling sectors. Supporters also argued that licensing and relocation decisions by operators require time before the impact can be measured.

The current review will determine whether the government continues with the reduced rate or considers changes to the policy.

The issue also forms part of broader budget negotiations for Michal’s government, which holds a narrow parliamentary majority after two MPs left the governing parties. The Reform–Eesti 200 coalition currently controls 50 of the Riigikogu’s 101 seats, making budget approval a significant challenge for the prime minister.