Palantir faces scrutiny over European tax avoidance strategies

Palantir, which holds contracts with multiple European governments, has paid relatively little tax in Europe, according to a new report.

Researchers from the Centre for International Corporate Tax Accountability and Research (CICTAR), a non-profit organisation, and the European Public Service Union (EPSU), a trade union federation, found that Palantir reduced its tax liability in the region by shifting a portion of its revenues abroad.

Co-founded by Peter Thiel, the software company has drawn controversy for years over the surveillance capabilities of its technology, which critics contend raise privacy concerns.

The clients Palantir chooses to work with — including the military, law enforcement, and immigration services — have also fuelled this debate.

Palantir has secured significant success selling data analytics services to governments across Europe, most notably in the UK, France, Germany, Sweden, Spain, and Italy.

Securing major government contracts has boosted the company’s regional revenues. However, according to the CICTAR and EPSU report, Palantir employs tax strategies that facilitate what is known as base erosion, allowing the firm to lower the amount of tax it pays in Europe.

According to the report, the company achieves this by paying service fees to its US subsidiaries and introducing deductible expenses that diminish its taxable profits in Europe.

Consequently, while the effective tax rates applied to Palantir’s European operations appear high, the company manages to report low pre-tax profits.

Meanwhile, tax rates in the US remain significantly lower than those in Europe.

This practice extends to Palantir’s operations in the UK, which sits outside the EU.

None of the practices detailed in the report are illegal, and many large multinational corporations structure their operations in this manner to reduce their tax liabilities.

However, CICTAR and EPSU argue that base erosion is particularly problematic in Palantir’s case, emphasizing that while the company receives payments from governments for delivering services, it minimizes its contribution to the taxes that fund those very services.

Jan Willem Goudriaan, General Secretary of EPSU, said in a statement:

“Governments contract with Palantir to strengthen national security; but Palantir, by avoiding taxes, undermines public services, including national economic security.”

Although Palantir is deeply integrated into regional public service delivery, European alternatives such as France’s Chapsvision are gaining increasing traction.

Germany’s domestic intelligence agency announced that it will switch from Palantir to Chapsvision. In June, the French intelligence agency also announced that it would begin working with the domestic company.