France has the third largest data centre market in Europe after the UK and Germany. The country has implemented a tax break for data centres making it 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 with data centres. The country has reportedly cut 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 competitors such as Germany and the Netherlands.
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 among 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 benefitted from sizeable tax incentives 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 aimed at data centres valued at than $1.5 billion. Apple would get exemptions on sales tax for electricity or natural gas on the condition that the company invested $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 per cent 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 per cent. 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 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, Facebook and Amazon have built big server centres. The country offers lots of free air cooling and access to undersea cable routes.
UK and France
The internet economy contributes around 10 per cent to the UK GDP. The data centres are part of this. In order to grow the data centre market, 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 colocation data centre energy costs by around 10 per cent (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.
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, data-centric companies would have to set up data centres in countries which are part of the EU. In light of the new incentives, France might be an attractive destination.
This article initially appeared on Verdict, which is part of the same groups as NS Tech and GlobalData