TALLINN, 16 March 2005 - The State Audit Office (SAO) finds that the government should have the possibility of refusing a gambling licence to a corporation whose owners’ background and the origin of resources cannot be reliably verified by the licensing authority.

Today the law does not allow of such possibility – if a licence applicant has submitted to the licensing commission an application with all the documents listed in the Gambling Act, supplied any additional information required by the commission and paid the government fee, the commission has no power to refuse a licence. The decision about the application is to be made within four months from the date of submission of documents as prescribed by the law.

For example, the limited partnership Cityclub filed an application for a gambling licence in October 2003. Although the commission could not ascertain the background of the company’s owners (a tax-free company) or the nature and origin of its resources, it decided to issue a licence in February 2004.

In the reply to the SAO it was stated that the draft of the new Gambling Act under preparation in the Ministry of Finance proposes to bring the information about the background of a licence applicant to bear upon the grounds for refusal to grant a licence.

The State Audit Office (SAO) has audited the activities of the Ministry of Finance in granting permissions to offer gambling games (games of skill, games of chance, betting, totalisators) and in exercising control over gambling operators. The objective was to find out if the shortcomings in gambling regulations and the activity of officials, identified as an outcome of the previous similar audit in 2001, have been eliminated. The audit covered the period from the beginning of 2002 to September 2004.

No major infringements were observed in the procedures for the issue of licences and operating permits to the organisers of gambling activities, however, there were significant deficiencies in the manner in which supervision was exercised.

The Government has not designated, in the audited period, a supervising authority referred to in the Gambling Act, instead supervision is carried out by the officials of the Ministry of Finance and of the Tax and Customs Board appointed by the Minister of Finance. Until now they have mainly inspected if gambling providers have followed the government regulations for lawful gambling and persons allowed to gamble, and if all taxes due to government have been paid on gaming machines and tables. No serious infringements thereof were detected and no licences have been revoked.

The Government has not imposed any requirements in the Gambling Act with regard to the fairness of games, i.e. if gamers are being cheated or not, thus this has not been inspected so far, as a rule. The currently effective Gambling Act (effective since 1995) makes provision for the requirements for the gaming equipment used in a gambling facility and for the game rules established by the Government of the Republic, or a Minister empowered by the Government. The Government has not yet imposed any requirements for game rules and gaming equipment, neither has it empowered any Minster, in accordance with the authority-delegating provision set out in the Gambling Act, to do the same. The lack of aforementioned requirements was brought to the attention of the Ministry of Finance by the SAO already in 2001.

In the course of the previous audit, the SAO pointed out serious shortcomings in the payment of government fees for licences and operating permits by gambling providers. The current audit showed that the shortcomings highlighted in the 2001 report had not recurred, however, the unpaid fees have not been collected in full.

All decisions made by the licensing commission from the beginning of 2002 to November 2004 were audited (two licences were issued in the period under review). Half of the decisions made in the same period by the Ministry of Finance about the applications for operating permits were evaluated (altogether 100 permits were issued during the period under review).

In order to evaluate the organisation of gambling supervision, all records made by the supervising officials were examined. The management of the said procedures was discussed with the officials of the Ministry of Finance and the Tax and Customs Board as well as the representatives of the Estonian Association of Gambling Operators.

The grant of permissions for and the supervision of the operation of lotteries were not audited.

According to the Ministry of Finance, gambling in Estonia was provided by 18 companies in 154 gambling facilities and games of skill were provided by 3 companies, as of December 2004. Two fifths of all gambling places are located in Tallinn. The majority of gambling providers have been engaged in this business from the first half of the 1990s. According to the data of the commercial register, the turnover in the gambling industry, net of other revenues, was EEK 1.1 billion in 2003. Twelve of the 16 licensed companies made a profit in 2003, their aggregate net income was EEK 113 million.

The gambling tax revenues received by the government in 2003 amounted to EEK 174 million. According to the Tax and Customs Board, EEK 204 million in gambling related taxes were collected in 2004, the forecast for 2005 is EEK 254.1 million (incl. EEK 29.1 million from lotteries).


Toomas Mattson
Communication Manager of National Audit Office
Telephone: 6400 777
Mob: 51 34900
E-mail: [email protected]

• Posted: 3/16/2005 12:00 AM
• Last Update: 9/22/2015 9:44 AM
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