Property tax | Data centers are mobilizing

Faced with the possibility that the property tax will apply to their equipment, data centers are mobilizing to fight what they consider to be a game-changer for their industry.

Helene Baril
The Press

“Data center equipment should benefit from the same property tax exemption as that of the manufacturing sector,” explains Bahador Zabihiyan, Partner and Director of Enovum Data Centers.

The entire data center sector has been mobilizing since the Court of Appeal ruled in favor of the City of Montreal, which applies property tax to certain data center equipment, which increases the value of the buildings that house them, and their municipal taxes.

The increase in operating costs resulting from the judgment not only threatens data centers, but also all companies that use digital and cloud services, the Conseil du patronat and the Fédération des chambres de commerce du Québec recently denounced. .

Two buildings housing the data centers of Ubisoft and the iWeb group are at the heart of the decision of the Court of Appeal, which authorizes the City of Montreal to add fans and other cooling equipment for servers to the property value of buildings where they are located.

The Supreme Court may eventually rule on the case, but in the meantime, the ruling is sending shockwaves through the growing data center industry.

Giants of the sector present in Quebec have appointed a McCarthy Tétrault lawyer, Nicolas Cloutier, to plead their case with the Quebec government. Compass, Cologix, Vantage, Qscale, Equinix and eStruxture want the Municipal Tax Act be amended to exempt their equipment from the property tax, as is the case in the manufacturing sector.

Their agent, Nicolas Rioux, is the lawyer who successfully defended Uber’s case with the Quebec Ministry of Transport.

New reality

Enovum, which has two data centers in Quebec and would like to expand, has decided to make its own case to the government.

Enovum targets video games and artificial intelligence customers, whose needs for digital services are growing rapidly. “Legislation and taxation must adapt to a changing economy, which is more oriented towards the digital sector and less towards the manufacturing sector. »

This is also the opinion of representatives of businesses in all sectors of activity, who fear that the broadening of the application of the property tax will harm the productivity of the Quebec economy.

The judgment makes it possible to make municipal financing on the backs of companies, while Quebec is already lagging behind Ontario in terms of productivity and investment, estimates for example Karl Blackburn, president of the Conseil du patronat.

The scope of the Court of Appeals decision remains to be clarified, but it could mean higher operating costs for all kinds of businesses, from dental centers to grocery stores.

eStruxture, the digital services company in which the Caisse de dépôt is a shareholder, counts media, content creators and financial service providers among its clients.

Since 2016, the Quebec government and Hydro-Quebec have actively promoted low-cost renewable electricity to attract data centers to Quebec. This campaign was successful and managed to attract about fifty of these companies, including the largest in the sector such as Google and Amazon Web Services.