With gambling shifting from brick-and-mortar casinos to the internet, proponents say Estonia's move to lower the tax from 6 to 4 percent over two years could draw more global operators.

"Fundamentally, there's not a huge difference," said Kaido Ulejev, head of Baltics operations at Betsson Group. Online casinos operate like physical ones, he explained, with the same requirements for verifying customers and tracking deposits.

Estonia's Gambling Act has remained essentially unchanged for over 15 years, but its rules also apply to online operators. Companies must obtain both an operating license and an administrative license from the Estonian Tax and Customs Board (MTA).

Ranno Aednurm, a lead consultant for gambling at the MTA's Excise Department, said the operating license requires a clean record for board members and owners. Online casinos must also meet a €1 million capital requirement, he noted, "and the board verifies the source of that money."

Administrative licenses further require that players are not listed as restricted from gambling.

Ulejev highlighted the "closed-loop" rule: deposits and withdrawals must go to the same account. "It's not allowed by law to deposit money from one account, win money, and then have the payout sent to a different account," he said.

Online gambling revenue growing

Brick-and-mortar casinos in Estonia have seen declining revenues for years, while online casinos have grown rapidly, especially following the COVID-19 pandemic. Estonia has issued 40 online casino licenses, with more applications arriving all the time.

Online gambling tax receipts have also risen sharply. In 2019, they accounted for just 10 percent of gambling tax revenue; last year, they represented more than a third.

Analyzing ways to fund culture and sports in Estonia, the Foresight Center suggested gradually cutting the tax rate to 5.5 percent. Its report imagines Estonia becoming a "second Malta" as a hub for online gambling.

"In this positive scenario, we assume 10 new administrative licenses each year," said Uku Varblane, the center's research director. Tax revenue per license would gradually rise, potentially doubling by 2029.

"We would need a least one or two globally significant operators to enter the Esonian market," he added.

The center also modeled a more pessimistic scenario where no new companies arrive, which would reduce tax receipts from €22 million to €16–17 million.

With the cut, Estonia would buck the European trend, as most countries are raising gambling taxes.

"Raising taxes can push gambling underground," Varblane warned, citing a Dutch study that found tax hikes reduced revenue but not play.

Malta still in a 'different league'

Across Europe, gambling taxes range from 10–40 percent, with Malta the only country at 5 percent.

Ulejev noted that Malta is Estonia's main competitor, but added that the two countries are operating in entirely different leagues right now — while Estonia has issued around 40 administrative licenses, Malta has roughly 350.

Yet Estonia's low taxes, clear regulations and EU license give operators credibility with players.

Tõnis Rüütel, director of the Estonian Gaming Operator Association (EHKL), said companies moving their offices to Estonia would be an added benefit that is hard to predict.

Rüütel pointed to groups like Yolo and Betsson, which offer hundred of high-paying jobs. "So relocating a back office here is entirely realistic, and also very practical and useful from the operator's perspective," he added.

Varblane stressed that the latest tax cut is not meant to encourage local gambling.

"Most of these companies are targeting the Finnish market," he said. "They use their Estonian license to provide services abroad, essentially like a financial service."

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