In the revised national budget for 2015, presented on the 12th of May 2015, the Norwegian government proposed a reduction of the energy tax for large data centres, effective from the 1st of January 2016. They also signalled a reduction of the corporate income tax.
In the budget proposal the electricity tax for households and the service industries will be increased from 0,1365 NOK to 0,1415 NOK, while the reduced rate of 0,0045 NOK (which traditional industries pay) will stay the same. From the 1st of January 2016, data centres will also be charged the reduced rate.
The change will of course have to go through Parliament this fall. There is broad political consensus in the Parliament for such a reduction. No political parties have been against the reduction of the energy tax for data centres; several parties outside of the government included a reduction in their alternative budgets last year; and several environmental organisations have applauded the government’s actions.
Justifications and consensus
Norway has a surplus of renewable electricity and the environmentalists deem it wise to utilize parts of this surplus for more industrial consumption in Norway, because consumption of energy locally by industries producing services for the international market could replace the use of fossil-based electricity elsewhere, thereby reducing the amount of fossil-based electricity being used globally.
The conservative Government does not allude to such environmental benefits in their proposal, but rather to the competitiveness of the budding Norwegian data centre industry.
This dual justification, both environmental and financial, gives the issue such a broad political foundation. All parties agree that Norway has traditionally been a fossil fuel-driven economy and now needs greener industrial legs to stand on.
The road ahead – EU and definitions
Going forward, the Ministry of Finance and the Ministry of Trade, Industry and Fisheries will work together to see whether the changes need to be notified to the proper authorities in the EU. If so, they will notify so that the change can take effect next year.
Norway, although not a member of the EU, is a member of the common market and follows all EU directives. Copying the Finnish model that the EU has already approved – allowing data centres with an energy consumption above 5 MW to pay the reduced rate currently applying to traditional industries – should greatly increase the likelihood of the new Norwegian tax policy being approved by the EU.
The proposal explicitly states that the energy tax for “large” data centres will be reduced to the reduced rate that industry is taxed with. However, the definition of large data centres needs to be specified.
Income tax – future reductions
The Government has also received a report suggesting that they reduce the income tax for corporations as well as individuals from 27 to 20 per cent. The government states in the revised budget that they will use this report as the foundation of their work on the matter. They have thus signalled a reduced tax without specifying the amount of the reduction or the timeline for such a reduction.
The tax report was commissioned by the former government. There is broad political consensus that a reduction should take place, but the level and rate of reduction are unclear.
Benedicte Fasmer Waaler is a Norwegian datacenter expert, working for Invest in Norway and ICT Norway