The Norwegian government is reviewing a proposal to abolish the policy of preferential tax treatment for data centers mining cryptocurrency with cheaper electricity. The executive power in Oslo says conditions have changed and the country needs the energy currently used by miners.
Mining Firms Likely to Lose Tax Incentive as Norway Seeks to Save Power, Collect More Tax
Norwegian authorities are on their way to scrap a tax cut that has been benefitting crypto mining businesses for years. They are proposing to get rid of the reduced electricity tax rate for data centers in the Nordic country, many of which are minting digital currencies.
Power for data centers will thus be subject to the general electricity tax rate, the same that applies for other service industries, the government said in an announcement published this week. Finance Minister Trygve Slagsvold Vedum explained the reasoning behind the move:
We are in a completely different situation in the power market now compared to when the reduced rate for data centers was introduced in 2016.
In many areas power supply is now under pressure, which causes prices to rise, Vedum elaborated. At the same time, the crypto extraction sector has expanded in Norway. “We need this power for the community. The government will therefore discontinue the scheme,” the member of the cabinet in Oslo was quoted as stating.
Investigations have shown that it is practically impossible to distinguish between electrical energy used for the minting of digital coins and that consumed by data centers for other purposes, the government also noted.
If crypto mining is to be subject to the regular electricity tax rate, the tax cut for data centers must be phased out entirely, officials believe. They estimate that in this case budget receipts will increase by 150 million Norwegian kroner (over $14 million) now and another 110 million kroner (more than $10 million) next year.
The latest development comes after a failed attempt to ban the energy-intensive mining of 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 the majority of Norwegian lawmakers. At the time, they also turned down a proposed electricity tax hike for crypto miners.
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