France is the third largest data centre country market in Europe behind the UK and Germany. The country has implemented a tax break for data centres making France a more attractive investment destination taking into account the current scenario on Brexit.
France data centre tax incentives
This tax break is an incentive that halves taxes on energy usage for companies having data centres. The country has reported cutting TICFE (taxe intérieure sur la consommation finale d’électricité) from €22.5/MWh to €12/MWh. The energy prices represent roughly one-third of the total operational costs associated to run a data centre. This is in addition to the low electricity prices which the country has when compared to its biggest competitors such as Germany and the Netherlands. France has followed other European countries which are a hub to data centres by introducing a tax break for data centres.
The increasing focus on data privacy and security is boosting the growth of data centres. Many countries across the world have set up tax breaks for data centres in their respective countries. In the US, there is competition amongst states to offer better incentives for data centres. These states offer a different kind of tax incentives for the data centre owner. In Arizona, Apple, Inc. benefitted from sizeable tax incentive when it started investing $2 billion in its data centre. The company has been exempted from sales and use tax on data centre related equipment purchases for ten years. The state introduced a new round of tax breaks in 2015 which was aimed at data centres larger than $1.5 billion. Apple, Inc. would get exemption on sales tax for electricity or natural gas on condition that the company invests $100 million in renewable energy. The State of Missouri offers exemption from state and local taxes for up to 15 years for data centres which bring in at least $25 million in new investment and create ten new jobs with wages of at least 150% of the country average over a three year period. In Iowa, Google, Inc. invested $1 billion into its data centre at Council Bluffs after getting nearly $20 million in tax breaks.
Sweden and Ireland
In 2017, Sweden implemented a new law by slashing the tax rate on electricity used by data centres by 97%. This order was implemented post the country witnessing the potential of contribution by data centres to the country’s economy. Data centres contributed $687 million and 3,600 jobs to the Swedish economy in 2015. The country is expecting that the tax reforms will create 14,000 jobs by 2025. Facebook, Inc. and Amazon have already invested in data centres in Sweden.
Ireland is said to have become a European hub for data centres as many companies like Google, Inc., Facebook, Inc. and Amazon, Inc. have built big server centres. The country offers lots of free air cooling and access to undersea cable routes which is required for a data centre.
UK and France
The internet economy contributes around 10% to the UK GDP. The data centres are part of this. In order to grow the data centres business, the country implemented a reduction in energy-related taxes for data centres through the Climate Change Agreement. The ten-year scheme which began in 2014 will run till 2023. The scheme reduces the colocation data centre energy costs by around 10% (about 1.5 pence/kWh) in exchange for requiring facilities to reduce energy usage by the sector as a whole so that overall emissions go down.
The data-centric companies, especially in Europe, are checking for new developments on Brexit and GDPR which will drive their investment decisions. GDPR is Europe’s new General Data Protection Regulation which came into effect from May 2018. This law restricts the movement of data outside Europe and other approved countries. The UK is currently part of the European Union (EU). Post-Brexit, these data-centric companies would have to set up data centres in countries which are part of the EU. Countries such as France, which has implemented tax breaks for these companies, might be one of the attractive destinations in the future.
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