Estonia’s Gambling Tax Revenue Plummets by 30% Due to Coronavirus

30.04.2020, 16:10

Estonia, like many other countries, has been hit hard by the COVID-19 public health crisis. On April 24th, Estonia’s government extended the country’s state of emergency from May 1st until May 24th. According to the nation’s Prime Minister, Jüri Ratas, there has been a decline in the number of new coronavirus infections and hospitalizations. Ratas is hopeful that the total number of COVID-19 cases in Estonia has reached its peak and that contraction rates will continue to lower. However, this is not a quick process, hence the decision to extend the state of emergency. In Ratas’ public statement, he said that not all restrictions would be lifted simultaneously. Rather, the government will roll out restorations over the coming weeks. 

Ratas stressed that a prerequisite of lifting restrictions is that the public must adhere to hygienic standards and comply with rules of conduct. As businesses start to open back up, Ratas’ primary objective will be to aid economic recovery. 

This may be slow going, as Estonia has been subject to financial turmoil over the past several weeks. According to the Deputy Secretary General at the Ministry of Social Affairs, Rait Kuuse, Estonia’s gambling tax revenue plummeted by 30% during February. Kuuse has not stated whether or not it declined further in March, but it most likely did. In fact, projections showed that gambling revenue would probably continue to fall throughout the rest of spring.

According to the Estonian Tax and Customs Board (EMTA), 45% of gambling tax revenue came from lotteries, while slot machines brought in 34%. Casino tables provided 5% and toto (a type of lottery service) pulled in 4%. Tournaments involving games of chance only brought in 1% of gambling tax revenue. 

Kuuse stated that the fall in gambling tax revenue was caused by the restrictions put in place to prevent coronavirus transmission, which, in turn, paralyzed the nation’s economy. Kuuse also mentioned that activities related to social welfare had been paused, since they were funded by the Ministry of Social Affair’s tax revenue. Since land-based gambling establishments are not operational for the time being, the Ministry is not bringing in the tax revenue it needs to keep those activities going. 

Online gambling is legal in Estonia, yet the activity is not enough to make up for the revenue loss experienced by land-based casinos. Gambling is still relatively young in the nation, as it was prohibited when Estonia was a part of the USSR. Illegal casinos still functioned, but the legal history of gambling did not begin in Estonia until around 1995, when the first Lottery Act was enacted. 

Kuuse stated that the halt of social welfare activities would surely put a good deal of pressure on the Ministry to finance projects despite the lack of tax revenue. He continued on to say that the department’s goal is to cooperate with its partners and determine which activities take precedence for assistance. In order to do so, the department has asked all of its partners to review their planned activities for the rest of 2020 and determine which ones have been rendered impossible due to the government’s restrictions. The partners should report back to the government about whether any of the events can be postponed. 

The cooperation between social welfare partners and the Ministry is of the utmost importance. Small projects have to apply in order to receive vital government funding. Kuuse stated that payments for the 2nd quarter of 2020’s fiscal year took place in April. However, he did not clarify whether these were tax payments from operators or funding doled out to the Ministry’s partners. However, Kuuse did note that the payments were made according to an agreed-upon schedule and that his department is working hard to lessen the blow of the ongoing health crisis. 

Kuuse added that the Ministry of Social Affairs would continue to communicate transparently with its partners and keep them updated about the situation. The Ministry will consider all possible ways that it can continue to provide funding for its partners’ social welfare activities. 

How Are Estonians Spending Their Money?

On April 24, 2020, Swedbank issued a report regarding consumer spending within the Baltics. The countries studied were Estonia, Lithuania, and Latvia. The report showed that, during the COVID-19 crisis, card transactions in the Baltics were down by 23%. When excluding food and “miscellaneous stores,” card spending had declined by 50% in Estonia. In addition to this, Estonia’s cash withdrawals plummeted by over 50%, which is a greater decrease than Latvia and Lithuania experienced. 

Swedbank found that Estonia’s travel and hospitality industry suffered worse than its other economic sectors. When compared to Latvia and Lithuania, Estonia experienced the sharpest fall across most of the studied sectors.

Estonians have been spending more of their money on food, whereas Latvians are purchasing gardening supplies, and Lithuanians are gambling.  

Latvia is seeing less of an economic impact than Estonia and Lithuania due to its less severe preventative restrictions. Therefore, the country’s fall in economic sectors such as transportation and beauty are not as severe as in Estonia. However, on March 22nd, the Latvian Constitutional Court passed an emergency coronavirus bill, which called for a ban on online gaming. In addition to this, the bill mandated the immediate suspension of land-based casino licenses until April 14th. It is likely that this will be extended, possibly for up to three months. Only time will tell how the Latvian government will be affected by the unavoidable loss of gambling tax revenue.