How a Legal Error Altered Estonia’s Gambling Tax Policy

How a Legal Error Altered Estonia's Gambling Tax Policy

Estonia's effort to recalibrate its gambling tax policy has produced an outcome few lawmakers anticipated. A reform intended to introduce a gradual reduction in gambling taxation has, due to a drafting error, resulted in the temporary removal of online casino tax for much of the sector. The issue has sparked political debate and raised concerns about legislative scrutiny, fiscal planning, and the risks inherent in fast-moving reforms.

The situation stems from amendments to the Gambling Tax Act adopted by the Riigikogu in December. The government's objective was to lower the gambling tax rate from 6 per cent to 4 per cent by 2028, with incremental reductions applied annually. The first step in this process was designed to reduce the rate to 5.5 per cent, setting the tone for a phased approach rather than a sudden policy shift.

Instead, ERR News reporting has revealed that the wording of the amended law applies the new 5.5 per cent rate only to a narrowly defined category of “skill games”. Under Estonia's existing legal definitions, this classification does not include games of chance, which make up the bulk of online casino offerings. As a result, most online casino activity is not subject to gambling tax for the current year.

The anomaly is limited to the initial year of the reform. Provisions covering subsequent years were drafted to explicitly include games of chance, suggesting that the error occurred during the first stage of the legislative revision rather than reflecting a broader policy decision. Nevertheless, the immediate impact is significant, both financially and politically.

According to local reports, the mistake was not identified during parliamentary review or committee discussions. It was reportedly discovered only after the law had entered into force, when a lawyer acting for a gambling operator examined the revised text. The delayed discovery has prompted questions about how the provision passed through multiple readings without being corrected.

Criticism has been swift, particularly from opposition figures. Riina Sikkut, a member of the Social Democratic Party and the Riigikogu's Finance Committee, has warned that the error will reduce funding allocated to culture and sports, which rely in part on gambling tax revenue. In comments cited by ERR, she argued that the situation reflects deeper problems with how the reform was prepared and adopted.

Sikkut linked the outcome to political pressure surrounding the bill, suggesting that speed and compromise took precedence over technical accuracy. From her perspective, the current situation confirms earlier concerns that a rushed approach to gambling taxation could produce unintended consequences. While the exemption applies only temporarily, she has argued that the lost revenue will still be felt.

The gambling tax reform was promoted by members of the Reform Party, including Madis Timpson, chair of the Legal Affairs Committee. Timpson had previously described the planned tax reductions as a way to make Estonia more attractive to remote gambling operators, positioning the country as a competitive jurisdiction within the European market. His argument centred on the idea that lower taxes could encourage operators serving players in other countries to base their activities in Estonia.

That view was not universally shared within the governing coalition. Some lawmakers questioned whether modest tax changes would be sufficient to influence business decisions in a sector where regulatory stability, compliance costs, and market access often outweigh marginal tax differences. These reservations have gained renewed attention following the discovery of the drafting error.

Prime Minister Kristen Michal, also from the Reform Party, defended the tax reform during parliamentary debates, even as criticism emerged from within his own party. According to opposition figures, some Reform MPs privately described the legislation as poorly constructed, though it ultimately passed amid broader negotiations over the state budget.

Former finance minister Mart Võrklaev, who voted in favour of the bill, later expressed misgivings about its quality. Speaking after the vote, he characterised the law as flawed but suggested that political realities left limited room for manoeuvre. Võrklaev indicated that the coalition's stability and the passage of the state budget were closely tied to the gambling tax reform, putting pressure on lawmakers to support the bill despite reservations.

To balance the fiscal impact, Võrklaev proposed offsetting the savings elsewhere in the budget, including a temporary reduction in maritime transport subsidies. His comments illustrate how the gambling tax debate became entangled with broader budgetary negotiations rather than being assessed solely on its own merits.

The financial implications of the drafting error remain under assessment. While the exemption applies only for the current year, it creates a short-term gap between projected and actual tax revenue. It also raises legal and practical questions about whether corrective amendments can be introduced quickly and whether any changes could be applied retroactively.