Attracting Tech-giants Through Fiscal State Aid

Yvette Lind

Research output: Working paperResearch


Most of the new hyper scale data centres are built in cold and remote areas where free cooling is available. The north of Sweden has proven to be a highly strategic location for such data centres. Not only because of the cold climate and rural remoteness, but also the existence of renewable energy sources, mainly stemming from wind and water. Over the past couple of years, Sweden has managed to attract multinational tech-giants such as Facebook, Microsoft, Amazon, and Netflix to build their data centres in Sweden. Most noticeable was Facebook´s decision to choose Luleå, a northern city close to the Finish border, as the location for its first European data centre with the capacity to serve more than 800 million Facebook users. Sweden's preferential tax treatment of data centres, in combination with a low property tax and the decision to not implement any digital service tax (DST), may also have influenced the great interest in establishing data centres.

In this contribution, Sweden's favourable tax regime which awards a significantly reduced taxation of electricity taxes to data centres is examined. Data centres are, when subject to the tax regime, subject to less than 2% of the normal electricity tax tariff. Multinational tech-giants benefit heavily from it while many domestic companies are excluded from it due to its technical design. Initial calculations indicate there is tax savings of more than SEK 500 million (circa Euro 50 million) on an annual basis. Therefore, the tax regime acts as an international tax competition tool through its fiscal state aid function while at the same time eroding the tax bases and business life of northern Sweden. It does not, at first sight, appear to infringe EU state aid rules nor the principle of non-discrimination. Illustrating that there is still some leave way for individual Member States to compete through tax measures.

Additionally, tax policy objectives of the tax regime are considered and analysed. In particular, the impact it has had on not only international tax competition but also the economy of local municipalities, local business life and progressive climate goals.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School [wp]
Number of pages18
Publication statusPublished - 2020
SeriesCBS LAW Research Paper


  • Multinational enterprises
  • IT companies
  • Tax incentives
  • Energy taxation
  • State aid
  • International tax competition
  • Data centres
  • Tech-giants
  • Co-location centres
  • Climate goals
  • Sustainability
  • Tax policy

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