Palantir is experiencing significant growth. In the UK, it contributed £2 million in taxes.

      Palantir is experiencing an outstanding week. The company's shares surged by nearly 30% on Tuesday. Chief Executive Alex Karp predicted that revenue will nearly double to $8 billion this year and described the demand as “otherworldly.” Additionally, a report revealed that the company pays virtually no taxes outside of the United States.

      The figures are most pronounced in Britain, which is Palantir’s largest market outside the US. The company possesses approximately £670 million in UK government contracts and reported £247 million in UK revenue for 2024. However, it only paid £2 million in UK corporation tax that year, according to the Guardian. The study associated with these numbers estimates Palantir’s global effective tax rate at 1.4%.

      How the Margin Disappears

      The report from the Centre for International Corporate Tax Accountability and Research outlines a trend of profit shifting. In the US, Palantir retained 47.7 cents of profit for every dollar of revenue last year, as reported by Politico. Outside the US, the margin dropped to 6.3%, and in some European branches, it was about 3%. The study indicates that almost all pre-tax profits are routed to the American parent company.

      The mechanics of this are rather typical. Palantir reports only 4% of its revenue abroad, despite a quarter of it coming from non-US customers. The contracts are signed by its American entities. In Sweden, the company reported €13.7 million in revenue but only €1.1 million in profit, resulting in a tax bill of €424,000. By compensating employees with shares instead of cash, it further reduces its corporate tax obligations, shifting the burden onto the workers.

      Palantir's Response

      Palantir disputes this characterization, asserting that it adheres to tax regulations in all countries where it operates. The company claims that its tax contributions “reflect the level of economic activity” in each location. A spokesperson noted that transfer pricing is “entirely standard practice” for large multinational corporations. Furthermore, the company highlighted that it paid $148 million in UK employment taxes last year, emphasizing that the report makes no allegations of illegality.

      Palantir also contends that its share scheme ultimately generates more tax revenue, not less, since employees pay income tax at rates exceeding the 25% corporate rate. However, this argument has limitations. In the US, Palantir has accumulated substantial tax credits and previous losses, meaning that at its current profit levels, it would be exempt from federal income tax for nearly a decade, according to the report.

      The Political Context of Public Contracts

      The report's impact stems from the source of Palantir’s revenue: public funds. The study was commissioned by Unison, and Andrea Egan of the organization cautioned that companies “shouldn’t be free to pay what they please” and argued that ministers should refrain from awarding public service contracts to firms that are “starving them of cash.” This controversy amplifies the ongoing scrutiny of Palantir’s work with the NHS.

      The sentiment across Europe has shifted already. Germany's military has rejected working with the company, while France is opting for a domestic competitor instead. Palantir is not the only American tech giant employing this profit-routing strategy; other companies like Apple, Amazon, and Microsoft have also clashed with Europe over tax issues. However, the timing is particularly uncomfortable given that a company generating billions is only paying £2 million in taxes while holding £670 million in contracts in Britain.