Intellect Calls For Action On Data Centre Tax Breaks

IT industry body Intellect wants input for its campaign for energy tax breaks for the data centre industry.

If data centres are exempt from some energy taxes, the overall economy will benefit, and energy use will go down in the long term, according to Intellect, adding that if heavy energy taxes are applied, the data centre business may go elsewhere and Britain’s economy would suffer.

Give us a CCA!

Intellect wants a climate change agreement (CCA) for data centres, which would confer some exemption from energy taxes, in recognition of their role in building the economy.

“The government wants to promote the digital economy,” said emma Fryer, climate change programme director at Intellect, “and data centres are the heart of the digital economy.”

The Department of Energy and Climate Change (DECC) can set up CCAs for specific industry sectors deemed to be important.  The CCA grants exemption from the CRC – a “polluter pays” energy tax which has been on its way since 2010 – and the Climate Change Levy – a tax on energy supplies to large organisations, so costs can be kept down and the sector remains competitive in world markets.

To qualify,the sector must prove that it is energy intensive, and subject to international competition, and must also commit to long-term collective action to reduce energy use.

Intellect is taking a lead in the campaign for a data centre CCA, and is looking for information to back up the request. Intellect has to convince DECC, and give it enough figures to prove to the Treasury that the CCA would be effective in boosting the economy.

It is believed the CCA would cost the treasury around £5 to £10 million in lost tax revenue, but Fryer argues it would give a much bigger benefit to the economy. Currently the UK’s data centres make up about five percent of the global market, which Data Centre Dynamics puts at about $100 billion.

Already, the expectation of higher energy prices caused by CRC has hurt the industry, says Fryer: “It is possible that the potential financial implications of such a tax, in addition to the climate change levy, have already negatively impacted the competitiveness of the UK as a hub for data centre development.”

To convince the Treasury to allow a CCA, Fryer wants answers to some specific questions – and she is also interested in responses from those indirectly benefitting from the data centre market:

• Do you have any real life examples that demonstrate rapid growth rates within the sector (e.g. individual companies that have expanded rapidly or other indications of growth)?
• Do you have any other evidence of sector growth?
• Do you have any evidence that UK energy taxation or climate change policy is discouraging the sector from investing in the UK at the moment?
• Can you identify any non-tax barriers that are discouraging the sector from investing in the UK at the moment (these might include the availability of suitable sites or planning policy)?
• Would your perception change if the CRC were abolished?
• Would your perception change if we were successful in negotiating a CCA?

Send any answers to these questions to Emma Fryer

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