How to kill the datacenter business

With an environment that lends itself to significant green datacenter potential, Iceland's dreams of becoming a datacenter mecca seem to have run afoul of the governmental bureaucracy.
Written by David Chernicoff, Contributor on

They survived earth quakes, severe weather, and a volcanic eruption that shut down air travel over a good portion of the planet, but it looks like the big plans of Icelandic datacenter providers may have been shot down by that most insidious of creatures; their own politicians.

With the announcement that IBM, as well as other major players, was postponing their involvement in the large datacenter operation planned for the former military base at Keflavik International Airport the prospects of a relatively rapid ramp up of the Icelandic datacenter operation seemed to be pretty well dampened.  At issue is the fact that the servers in the datacenters are currently subject to the Icelandic VAT and this additional taxation adds a major increase to the costs of setting up a datacenter in Iceland. The decision is apparently in the bureaucratic hands of the Icelandic Ministry of Finance, who has yet to make a decision

In the EU, servers are excluded from VAT so their inclusion in the Icelandic tax model came as a surprise to the potential datacenter facility customers. Due to the fact that the companies using the facility would not be operating on a permanent basis in Iceland, the VAT is non-refundable.  Within the confines of the EU companies can move servers from country to country without incurring a tax penalty under an exclusion in the tax code of the EU covering the free flow of product.

Regardless of the greenness of datacenters based in Iceland, the bottom line for business is the cost of doing business. By adding an unnecessary tax burden to the operation of datacenters in the country, the Icelandic government is throttling the growth of an entire industry sector.  And it's not as if the government would be getting revenue from this business model if the tax stays in place.  The actions of the major corporations necessary for a successful launch of world-class datacenters makes that abundantly clear.

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