Authors of a government-commissioned study in Sweden have recommended that the government lowers the tax burden on data center operators the same way it gives tax breaks to other industries that consume a lot of electricity and compete globally.
Already home to massive data centers by Facebook, data center provider Hydro66, and the bitcoin mining specialist KnC Miner, Sweden boasts low energy rates, cool climate, and robust network infrastructure – all crucial factors in data center site selection. Tax rates are another big factor companies consider when deciding on a data center location.
Governments have been using data center tax breaks as a way to attract the big high-tech construction projects to rural areas in hopes of boosting local economies. A recent analysis by the Associated Press, found that state governments around the US have committed to about $1.5 billion in tax breaks for data centers over the past decade.
Sweden has been providing lower tax rates to industries that are both energy-intensive and exposed to international competition. The rationale is that some industries, such as manufacturing, find it difficult to compete with foreign companies if they’re taxed too heavily at home.
The study found that data centers, a young industry, are worthy of such “protection.”
“This industry is only a couple of decades old, but is growing fast both in Sweden and internationally, due to the increasing use of the internet and of online services. The result is an increased need for data center capacity. The industry is assessed as still having great development potential,” the report’s authors wrote.
Sweden is ranked third on the latest Networked Readiness Index 2015 that’s part of The Global Information Technology Report commissioned by the World Economic Forum. The index rates countries’ potential for ICT industry growth based on regulatory environment, skills, infrastructure, potential for ICT’s economic impact, and other factors.
Singapore ranked first, followed by Finland. US ranked seventh, and the UK ranked eighth.