American columnist David Chernicoff writing on ZDNet September 9 said that plans of datacenters in Iceland are being shot down by Icelandic politicians. His article begins like this:
Minister of Finance Steingrímur J. Sigfússon. Photo: Páll Kjartansson/Iceland Review
“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.”
Chernicoff then discusses the news that IBM and other major players are postponing involvement and that prospects for the center now seem to be dim: “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.”
Chernicoff then explains the law on VAT and compares it to taxes in the European Union:
“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.”
Minister of Finance, Steingrímur J. Sigfússon said to RÚV, Icelandic State Radio, that he thinks it is unfair that taxes will not be paid at the “place of operation.” Minister of Industry, Katrín Júlíusdóttir, said that a solution to this problem would be presented soon, probably this month.