Will Finland’s move to cut data centre tax breaks damage investment?

In March 2025, Finland made the decision to abolish electricity tax breaks for data centres, shifting them from a lower rate of 0.05 cents per kilowatt-hour (kWh) to the standard rate of 2.24 cents per kWh.

In response, companies could start to rethink their data centre plans in the country – including XTX Markets, which originally planned to spend more than €1 billion on building a new data centre complex. The trading firm is now undergoing a review of its long-term investment roadmap “due to the proposed changes in electricity taxation,” XTX’s chief operating officer, Michael Irwin, said via a statement on 11 August 2025.

There has been plenty of investment in recent years across Finland, on account of its cool climate, access to renewable energy sources, strong digital infrastructure, and cheap electricity. The question is now whether other data centre companies will follow suit and reconsider their engagement.

Consequences for innovation?

Initially, Finland reduced the electricity tax for data centres exceeding five megawatts (MW) in 2014. In March 2025, the government said it would be removing the lower electricity tax rate from data centres and move them to a more standard rate – a move that resulted in much criticism from the industry.

Tax breaks matter to the data centre industry, with many experts and lobbyists arguing that they are essential for driving economic development.

Currently, roughly €30 million is allocated annually to data centres under this scheme and has helped technology giants like Google set up facilities across the country. Critics are now arguing that removing the incentive could disrupt the data centre industry in Finland if companies are not prepared to be taxed more.

It has also been suggested that a decision like this could upset Finland’s competitive edge in the data centre industry. Data centres have been touted as vital for powering the new era of digital transformation, with many new facilities being kitted out for AI and cloud innovation. Currently in Europe, billions are being poured into data centre growth specifically to build ‘AI gigafactories’.

Likewise, building and maintaining data centres creates hundreds of jobs and opportunities for further growth. Changing the tax policy could leave Finland with continued high demand, but less to show for it.

Being held to account

Despite such opposition, other countries have also reversed incentives – including Nordic Sweden, which removed a similar data centre tax break in 2023. Yet, the country’s market is currently exploding, on account of its low climate impact cooling, renewable energy access and major city land cost increases.

Yet, the country remains a digital hub and is currently witnessing a pivotal shift from on-premises to cloud and colocation data centres. Key industry figures like Equinix, Digital Realty and AWS continue to drive growth in Stockholm in particular.

The Republic of Ireland is another critical example of a nation that has imposed controls on its data centre investments. Having long been a critical hub for data centres, regulatory stability, and a low tax environment has prompted plenty of tech giants to build there.

In 2022, however, state-owned grid operator EirGrid imposed a de facto moratorium on data centre development in Ireland – meaning the country will not consider new load requests until 2028. As of April 2025, there are 82 data centres in the country.

This paradox ultimately seeks to protect grid capacity and ensure that Ireland meets its sustainability and climate targets.

Finland’s move is therefore looking at larger trends across Europe concerning data centre energy use. Demand across the country has risen faster than expected and has inevitably put pressure on the grid in southern Finland in particular.

In January 2025, Fingrid, a national electricity transmission grid operator, said it would be restricting new grid connections in some areas up to 2027 until additional transmission capacity is completed.

Protecting the grid vs. empowering innovation

Finland remains an exciting destination for data centre companies. It remains easy to secure a green loan and to engage with renewable energy to prioritise sustainability and operate cleanly. This is vitally important so that data centres don’t put unnecessary pressure on the grid and are instead able to support the local communities in which they operate.

However, enterprises are eager to recognise that job creation and building a stronger economy are also important. Supporting local people via job schemes and internships is also beneficial and can create a more empowered workforce to innovate and engage with the latest technologies.

But if it becomes more expensive, will data centre companies continue to invest in the region?

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