With the cost of data centers and the computing equipment that fills them on the rise, chasing tax breaks could be a way for enterprises to optimize their costs.
Tax benefits for hyperscalers and other data center operators are costing local administrations billions of dollars. In the US, three states are already giving away more than $1 billion in potential tax revenue, while 14 are failing to declare how much data center subsidies are costing taxpayers, according to Good Jobs First.
The campaign group said the failure to declare the tax subsidies goes against US Generally Accepted Accounting Principles (GAAP) and that they should, since 2017, be declared as lost revenue.
“Tax-abatement laws written long ago for much smaller data centers, predating massive artificial intelligence (AI) facilities, are now unexpectedly costing governments billions of dollars in lost tax revenue,” Good Jobs First said. “Three states, Georgia, Virginia, and Texas, already lose $1 billion or more per year,” it reported in its new study, “Data Center Tax Abatements: Why States and Localities Must Disclose These Soaring Revenue Losses.”
While taxpayers may be aggrieved at the tax advantages being dished out to these corporations and the loss of revenue, enterprises looking to run data centers are being offered a lot of favorable terms and are in a good position to benefit from the incentives. Management consultant PWC has pointed out that companies can reap the rewards of a variety of tax breaks for data centers.
Outside the US, other countries are happy to provide financial breaks to data center operators too: the UK can offer 100% tax relief on energy saving technology while Brazil also provides an element of relief for the operation of data centers.
