Pocock targets tech giants with proposed $3b data centre tax

Australia should tax so-called "AI factories" owned or operated by tech giants like Amazon, Microsoft and Google to get more long-standing benefits from the data centre investment boom, ACT senator David Pocock says.

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Tech companies should be hit with a five per cent data centre levy to offset their low company tax payments, ACT Senator David Pocock told the National Press Club Wednesday. Picture by Keegan Carroll

Senator Pocock in an address to the National Press Club on Wednesday accused the Albanese government of being "starstruck" by US artificial intelligence (AI) companies and "blind" to community concerns about the energy and water guzzling data centres that host them.

A 5 per cent levy independent of other taxes or council rates on facilities that are owned or operated by or host rapidly scaling tech companies would raise just shy of $500 million over the next four years, Senator Pocock said.

Modelling of the levy completed by the Parliamentary Budget Office (PBO) seen by this masthead shows potential net earnings of just under $3 billion by 2036-37.

But the PBO noted "a high degree of uncertainty" about its estimates due to "limited information on Australian data centre revenues, customer composition and future market development", and the expectation that such a levy would need to begin in the coming year.

Senator Pocock said the modest levy would still be enough to offset the federal budget's entire annual spending on new social and affordable housing through the Housing Australia Future Fund.

"I fear the influence of vested interests means we are about to repeat the same mistakes of the resources boom in the data centre gold rush," Senator Pocock said in his address.

"In the context of a forecast $200 billion investment and little to no corporate tax paid by foreign data centre companies in this country, [the levy is] not much - but it's better than the nothing we'll get if we don't put in place something like this now," he said.

Amazon Web Services and Microsoft alone have pledged around $45 billion in local data centre investment, while up to 65 per cent of the market is expected to be made up by similar hyperscale users according to PBO modelling accompanying Senator Pocock's levy proposal.

The levy would capture all data centres drawing more than five megawatts from the national power grid, but would exclude "co-location" centres that rent racks and servers space or compute power to non-hyperscale customers, which have previously accounted for the bulk of Australia's market.

Hyperscale facilities are often used to train AI models while colocation facilities more likely host cloud and computer power, or AI "inference" operations.

Senator Pocock said Australian Taxation Office transparency reports showed some hyperscale tech companies were offshoring billions in revenue while paying company tax rates of between just 1 and 4 per cent.

He said communities concerns about the long term benefits of data centres had been "forgotten" as the government moved to attract data centre investment.

"Our government seems starstruck by the US AI companies and blind to community sentiment and long-term costs if we get the AI policy settings wrong," Senator Pocock said.

"We have to get better as a country at capturing long-term benefit and setting the terms of engagement."

Industry group Data Centres Australia's chief executive Belinda Dennett said the levy risked scaring investors away from what she said was an already expensive local market.

"Capital is mobile and global customers have choice," Ms Dennett told The Canberra Times.

Ms Dennett said data centres already supported incoming government expectations that they ensure longstanding community benefits and pay for their own energy and water infrastructure to stop consumers' bills from rising.

"But there is a point that the cumulative impact of asking one sector to fund all of this makes Australia uncompetitive," Ms Dennett said.

Australia's data centre market has wobbled in recent months following the collapse of a multibillion-dollar sharemarket float by Australian-founded company Firmus.

Australia's largest publicly listed data centre company NEXTDC on Wednesday paused trading after activism by Melbourne locals temporarily prevented works to expand some of its signature Australian data centres.

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