The Australian government announced this week that it might be moving some of its data offshore, in a bid to better its business services. Globally, countries have begun to ask the question: is storing data in the Cloud worth the change? Choosing the most cost-effective way of managing data storage – and efforts to lower corporate taxes – have long been strategic business concerns.
Australia’s Commonwealth bank has already made the transition, saving themselves millions of Australian dollars. Using cloud services, the bank estimates it has spent almost three times less on its IT services by using cloud computing. This includes savings on energy bills and server maintenance for which the provider is responsible.
There are certainly attractions for businesses internationally that are interested in making the same move. Those that already use cloud storage have recently enjoyed lower taxes, according to a US-led investigation last year. Microsoft, for example, re-routed some of its activity through Puerto Rico, where the company has a data-building hub that employs nearly 200 workers. This saved the company more than $4.5 billion in tax over three years (2008-2011) on products sold in the US.
Moody’s Investors Service, an agency based in the US, released figures revealing similar stories for other technology companies in North America. By storing profits offshore, a number of companies managed to avoid paying a 35% tax rate that would otherwise have been levied once funds reached the US. In Vermont, Governor Peter Shumlin has suggested that sales tax be removed from businesses that making use of cloud computing, following $2 million worth of tax reimbursements to businesses last year. If the legislation goes through, critics estimate that more than $2 million will be cut from tax revenue – a number which is only set to increase in years to come.
As for the security risks associated with offshore data storage, there are significant and persisting concerns. The Australian Commonwealth Bank’s Chief Information Officer, Michael Harte, was forced to defend his company’s use of cloud computing, asserting that customer details were not currently – and never would be – stored on a public cloud. Others are less sure of the arguments for cloud computing. The former chief technology officer of McAfee, Stuart McClure, has criticised the availability and accessibility of secure cloud servers. Locating those that are actually secure can be tricky for businesses who aren’t technology experts. Cloud storage providers aren’t new to hacking attacks either. Last year, FireHost, based in Texas, had to face more than 64 million hacking attempts. With ever more businesses looking to use cloud storage, however, it’s unlikely there will be a shift back to traditional storage methods. And if tax breaks continue, we’ll be seeing a large shift in data storage and offshore funds.
