In recent months, Iceland was emerging as a prime spot to situate green data centers. The country seemed to be rolling out the red carpet for businesses with the prospect of opening up shop in the geothermally powered, energy free-cooling friendly nation. By all measures, it seemed like a dream come true for technology firms that want to establish a cloud-driven foothold in Europe in a cheap and environmentally desirable way.

What could go wrong? Taxes, that’s what.

You see, in the EU, servers are exempt from VAT (value-added tax). Not so in Iceland, which complicate matters for business that want to site computing centers there. Essentially, it gets very expensive to outfit a facility with hundreds or thousands of servers. So far, according to ZDNet’s David Chernicoff, IBM and others have put their plans to build data centers in the former military base at Keflavik International Airport on hold.

A shame, for both the advancement of green data centers and a potentially lucrative new industry for the region. As it stands now, it’s all in the hands of the Icelandic Ministry of Finance and companies are unlikely to come out of their holding pattern until they sweeten the deal.

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