Estonia’s cultural fund faces shrinking budget after tax changes

Estonia’s Cultural Endowment is set to receive less money than planned because of political decisions, putting funding for cultural construction and smaller grants under pressure, ERR reports. Lawmakers are seeking a quick solution.

The endowment is funded mainly by alcohol and tobacco excise duties and gambling taxes. A 3.5% share of alcohol and tobacco excise revenue accounts for roughly half its budget. The other half comes from gambling taxes, split among Eesti Loto, casinos and online gambling.

Four years ago, excise and gambling tax revenues each brought in €16 million. In the past couple of years, gambling revenue has been about €10 million higher than excise revenue, with online gambling accounting for a growing share. A tax cut approved a year ago was expected to attract more gambling operators and increase revenue, but that has not happened.

Cultural Endowment director Margus Allikmaa said lowering the remote gambling tax had been unjustified, arguing that it had not brought in new customers and had cost Estonia market share. He said other European countries were closing their markets to gambling operators licensed elsewhere.

The endowment distributes most of its grants through eight field-based funds, each with a budget of about €4 million. County expert groups also award smaller grants to projects, cultural workers and collectives. If the endowment’s budget falls, the amounts available to all these groups will be reduced.

The decline in gambling tax revenue also affects funding for cultural buildings. About half of the gambling tax collected by the state goes to the endowment, and half of that share is allocated to construction projects. The largest current project is the construction of the television building. Funding is also going to Tartu Siuru, while Tallinn’s film campus is expected to seek support soon. A planned extension to the Estonia building remains disputed, and the cultural quarter at Narva’s Kreenholm has been put on hold.

Construction of the film campus in Paljassaare could begin next year. Tallinnfilm director Joonas Tartu said the project’s €25 million investment would be paid out over several years and that borrowing was already expected during the most active construction period. If the Cultural Endowment’s tax revenue falls, the borrowing period could become longer and more expensive, leaving less money for the project itself.

Siuru director Aavo Kokk said construction would continue as planned. An agreement between the Cultural Endowment and the city of Tartu provides for a loan if the endowment lacks enough money during a particular period, with loan costs covered by the endowment.

Lawmakers are considering ways to halt the decline. Isamaa has proposed raising the remote gambling tax to 7%, the rate originally planned for this year. Reform Party members have called instead for the tax cut to be halted.