The Norwegian government is considering a proposal to end its preferential tax policy for data centers that mine cryptocurrencies with cheap electricity. Oslo’s executive power says conditions will change and the country will need the energy currently used by miners.
Mining companies are likely to lose tax preferences as Norway tries to save power and collect more taxes
Norwegian authorities are eliminating tax breaks that have benefited crypto mining companies for years. They are proposing to eliminate the reduced electricity tax rate for data centers in many Nordic countries where digital currencies are minted.
Power for data centers would thus be subject to the same general electricity tax rate that applies to other service industries, the government said in a statement released this week. Finance Minister Trygve Slagsvold Vedum explained the reasoning behind the move.
The electricity market today is in a completely different situation compared to when the reduced tax rate for data centers was introduced in 2016.
Power supply is under pressure in many areas, which is causing prices to rise, Vedum elaborated. At the same time, the crypto extraction sector has expanded in Norway.” We need this power for our communities. Therefore, the government will cancel this project,” a member of the Oslo cabinet was quoted as saying.
The government also noted that studies have shown that it is virtually impossible to distinguish between the electrical energy used to mint digital coins and that consumed by data centers for other purposes.
The authorities believe that if crypto mining is subject to the normal electricity tax rate, the tax break for data centers must be phased out completely. In this case, they estimate that budget receipts would increase by NOK 150 million (more than $14 million) now and by another NOK 110 million (more than $10 million) next year.
The move follows a failed attempt to ban the mining of energy-intensive proof-of-work cryptocurrencies in May of this year. A push in that direction by the far-left Red Party in Parliament was rejected by a majority of Norwegian lawmakers. At the time, they also rejected a proposed increase in the electricity tax for crypto mining.
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