Finland's government has announced it will eliminate the electricity tax subsidy for data centers. The tax on electricity used in server halls will increase by 2.19 cents per kilowatt-hour.
At the same time, officials confirmed they are preparing a new support model for data centers. The new subsidy would cost no more than the current tax benefit.
Finance Minister Riikka Purra explained the decision to reporters in parliament. She said the government wants to ensure Finland attracts useful data center investments that bring added value.
The electricity tax removal is part of government austerity measures aimed at increasing state tax revenues. The proposal estimates additional annual tax revenues of 47 million euros by 2026.
When asked about finding replacement savings for the new support program, Purra emphasized the government's commitment to fiscal stability. She stated that if new expenses push the budget off course, compensating savings must be found elsewhere.
Purra declined to specify potential future savings targets. The data center tax removal was itself a replacement measure for another abandoned plan - a planned increase in value-added tax on candy and chocolate.
Details about the new support model remain unclear. The Ministry of Economic Affairs and Employment is preparing the subsidy, which is scheduled to take effect next autumn.
Purra weighed the benefits and drawbacks of data centers during her comments. She noted that some data centers create valuable ecosystems around them.
Finland has many opportunities in this sector, but Purra cautioned against the country becoming merely an electricity reserve. She acknowledged that large numbers of data centers could significantly impact electricity prices over time.
Finland has abundant clean and affordable electricity, but Purra stressed that policymakers must look further into the future. She emphasized that electricity prices for ordinary households and other industries should not rise correspondingly.
When asked about imposing requirements on data centers to mitigate price and consumption peaks, Purra called this absolutely one perspective the ministry would consider.
Purra assumed data center investments would continue coming to Finland. She cited Finland's attractive features for these investments: affordable electricity prices, clean water, cold climate, and smooth permitting processes.
She noted that similar electricity subsidies have been removed in Finland's closest competitor countries, Sweden and Norway.
Purra declined to comment on whether technology company Google had threatened to cancel billion-euro investments in Kajaani and Muhos if the tax support was removed.
Reports indicated disagreement within the government about removing the tax benefit. Officials from the leading party expressed concerns about Google potentially canceling investments.
The government appears to be walking a fine line - seeking additional tax revenue while trying not to scare away major technology investments that bring jobs and economic activity to regions like Kajaani in eastern Finland.