At the end of July the Department of Enterprise, Trade and Employment published the Government statement on the role of data centers in Ireland’s enterprise strategy. Leo Varadkar, the Tánaiste and Minister for Enterprise, Trade and Employment, had already teed it up its contents in an interview with the Currency back in June.
He told the journalist Rosanna Cooney: “One thing that was made very clear to me by big companies that invest in Ireland and are going to invest more, they are going to create more jobs in Ireland – is that they see the whole thing as an ecosystem. Where they have their people and where they have their talent and where they pay their taxes, is also where they want to keep their data.” Varadkar continued: “One of the things we are looking at is whether we can prioritize data centers, where they are for an entity that has a significant operation in Ireland already.”
Big Tech says, “Jump”, Fine Gael responds, “How high?”
What became clear a while ago, and is now being explicitly said, is that the Government is trying to find ways to keep tech companies in Ireland. We all know there are moves globally to address unethical and unfair tax regimes. When Ireland signed up to the global tax reform deal, meaning our seemingly immovable rate of 12.5 per cent would rise to 15 per cent, it became obvious that 12.5 is not a magic number. But in the European Union, Hungary blocked its introduction. No surprises there, considering Hungary is the only country in Europe with a lower corporation tax rate than Ireland. But 12.5 and 15 are headline figures. Our tax regime remains.
By the end of the decade, it’s projected that data centers will be consuming about a third of all our electricity. This is wild, but it’s happening
Corporation tax revenue grew by an almost bizarre 30 percent between 2020 and 2021, from €12 billion in 2020 to €15.3 billion in 2021. The over-reliance is blatant and the risks are obvious. As corporation tax comes to represent a much larger share of tax revenue overall, what happens when things start to go wrong? By 2023, it is quite likely that corporation tax – having already leapfrogged excise duty revenue – could overtake VAT as our second largest tax issue. Right now, our corporation tax makes up 23 percent of all tax receipts. And yet we know that we are not in control of where companies decide to base themselves. Foreign direct investment is temperamental. Companies move.
The Department of Finance’s summer economic statement warned Government that it needs to prepare for a decline in corporation tax. The Irish Fiscal Advisory Council warned Government not to rely on it to fund spending. The Central Bank said the current level of our corporation tax take is “the main risk to our public finances”. These are loud alarm bells.
So what is the Government’s response to this risk? Building more data centers, for one thing. Data centers do not create employment, they are a large drain on electricity, and they risk both our energy security, and our climate targets. The Government appears to be prepared to run the risk in the hope that data centers will anchor Big Tech in Ireland indefinitely.
The new statement was an update on the 2018 statement. It almost reads like a press release from the data center industry. It sets out wishy-washy “principles” to “harness the economic and societal benefits that data centers bring”. This includes a Government “preference” for data centers “associated with strong economic activity and employment”, and a “preference” for data centers “that make efficient use of our electricity grid”, another “preference” for data center developments that can ” demonstrate the additionality of their renewable energy use”, a “preference” for data centers to co-locate a renewable generation facility, a “preference” for data centers “that can demonstrate a clear pathway to decarbonise and ultimately provide net zero data services” (the weakness of that language in particular is notable), and a “preference” for data centers that “provide opportunities for community engagement and assist SMEs”.
There are endless questions to ask about this new statement, but the woolliness of the language is one. The data center boom in Ireland is potentially the largest, swiftest (in terms of impact, and potentially size) industrial rollout ever seen in this country. Were there mega-factories being built that had the same energy and water demands of entire cities flying up around the country, it would be a sensation.
The situation is head-spinning. Electricity consumption by data centers increased by 32 percent between 2020 and 2021. The increase since 2015 has been 265 percent. Data centers now consume 14 percent of all metered electricity in this country, 2 percent more than all rural dwellings combined. By the end of the decade, it’s projected that data centers will be consuming about a third of all our electricity. This is wild, but it’s happening. And with this new “statement”, the Government’s outlook is clear: let them at it.