Last week, the Riigikogu passed an amendment to the Gambling Tax Act, initiated by the Eesti 200 parliamentary group, which will gradually lower the gambling tax on online casinos from the current 6 percent to 4 percent.

While the Ministry of Finance believes this will likely lead to a decrease in gambling tax revenue, Eesti 200 leader Kristina Kallas said on the program "Esimene stuudio" that there is no reason for doubt — the money will come.

"This law is not based on someone's dream. The entire potential tax revenue has been modeled together with the Foresight Center, how much market share would move to Estonia if the tax were lowered, how much tax revenue would come from that market share, how much the revenue would grow, and how we could use that extra money to fund culture and sports," she said.

The optimistic scenario, based on estimates from market participants, foresees tax revenue from gambling reaching €95 million by 2029.

However, a closer look at the Foresight Center's report shows scenarios that support a less positive forecast from the Ministry of Finance.

"We had a more pessimistic scenario where the tax change does not bring in new operators or additional tax revenue. In fact, revenue falls. But there was also a positive scenario in which tax revenue grows significantly," said Uku Varblane, head of research at the Foresight Center, adding that the so-called positive outlook has received more attention.

The biggest risk is not a possible hole in the state budget, but yet another money laundering stain on Estonia's reputation, warned Matis Mäeker, head of the Financial Intelligence Unit.

"Billions and billions are flowing through some system we do not actually see here in Estonia. We do not know who enters or exits it, but we know that money is moving through it — and the reputational damage to the Estonian state will fall on us, because the service provider will claim to be an Estonian service provider. So this is not just about accounting. There is a real risk and threat to our system and reputation," Mäeker outlined.

One common money laundering model involves a criminal visiting different online casinos over a few days. Funds of suspicious origin are deposited and a few small bets are placed. The money is then withdrawn from the cashier or transferred to another person during the game. The gaming platform is used as a payment service provider.

"Criminals are looking for service providers whose systems are not robust enough. And those systems tend to be in places where oversight does not see them. It's well known globally that criminals are increasingly turning to casinos or remote gambling because their controls are not as strong as those in the banking sector. So clearly, they are targeting areas where controls are weak," said Mäeker.

"If we look at the regulation the Riigikogu just passed, then in theory we are inviting in operators who do not want strong supervision. And such service providers typically serve high- or very high-risk clientele," Mäeker added.

In Malta, which has extensive experience hosting online casinos, the supervisory authority employs just under 200 people, according to Mäeker. In Estonia, the risk of money laundering in online casinos is monitored by about 10 people across the Tax and Customs Board and the Financial Intelligence Unit.

"At present, we cannot speak of adequate staffing and risk management, because there are too few people," said Evelyn Liivamägi, deputy secretary general at the Ministry of Finance.

She said the amendment will initially create five new oversight positions, with more to follow if needed. The money laundering risk in Estonia will increase, but the Ministry of Finance still does not foresee a rise in revenue.

"For tax revenue to increase significantly, we would need twice as many new entrants next year as the average so far. And from our perspective, that's hard to envision right now," Liivamägi added.

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