Estonia sits on the cusp of significant remote gaming reform after parliament gave final approval to a tax cut to 4% by 2029.
The bill passed by a vote of 51-31, with one abstention, in the Riigikogu, and will reduce the current tax rate of 6% by 0.5% annually until it reaches 4%. The policy formed by the ruling Eesti 200 coalition reverses previous plans to raise the levy to 7%.
In moving to reduce the financial burden on operators, lawmakers hope to attract international investment from and compete with the likes of Malta, Gibraltar and the Isle of Man as hubs for the industry.
Madis Timpson, Reform Party MP and one of the drafters of the new bill, emphasised the economic potential of improving investment for government revenues.
He said: “A remote gambling paradise is indeed what we could become. The idea would be that those foreign firms which are currently operating somewhere with their place of business officially registered in, for instance, Malta, would come to Estonia. Those people who are playing somewhere, I don’t know, in France, in Spain, their profits would come to us.”
The decision moves Estonia below Malta’s gaming tax rate of 5%, however, it remains greater than the tax rates for operators in the Isle of Man, between 0.1% and 1.5%, and Gibraltar, 0.15%.
Across all three locations, gaming has served as an economic driver. In the case of Gibraltar, the online gambling sector accounts for roughly 30% of the island’s GDP.
“[The changes are] a good way to grow and sustain a well-regulated market. That means better choice and protection for consumers, economic growth and the creation of jobs, and – ultimately – higher tax revenues,” Stephen Hodgson, Tax Expert for the Betting and Gaming Council, told iGaming Expert.
However, such aspirations come with stark warnings.
Opponents of the changes have warned that there is little evidence that the tax reduction will lead to an influx of iGaming companies as promised by the coalition. The country’s Ministy of Finance has shared predictions that the state could lose up to €13m in revenue by 2019 if projected industry growth is not achieved.
Even if Estonia does transform into Europe’s newest hub for business, such locations are often impacted by the wider fluctuations and regulatory upheaval within European markets.
Outside of Estonia, countries such as the Netherlands, Bulgaria and the UK have all moved to increase tax, leading to protests from operators and warnings of market reductions in the wake of increased financial obligations.
As a result, hubs such as Malta and Gibraltar have found themselves caught up in the political rumblings.
On the UK’s decision to hike remote gambling tax from 21% to 40%, Nigel Feetham, Gibraltar’s Minister for Justice, Trade and Industry: “There is no way of sugar-coating this. It is bad news.
“The level of corporate tax and PAYE revenue at risk in Gibraltar will depend on the extent to which local operators are able to mitigate the increased gambling tax costs. Raising taxes in the UK imposes higher costs on Gibraltar gaming businesses and reduces the amount ultimately paid in corporate tax in Gibraltar.”
Despite the coalition’s determined attitude towards transformation, the phased nature of the changes, alongside caveats from Foreign Minister Margus Tsahkna that there are provisions in place to ensure the decreases are paused if revenue targets aren’t hit, indicates that there remains an awareness within Estonia of the risks involved in such a bet on reform.
