In 2024, the software company Palantir Technologies reported a mere £2 million in corporation tax payments in the UK, despite securing public sector contracts totaling hundreds of millions. This low tax contribution is largely attributed to various tax incentives that may allow the firm to minimize its tax obligations worldwide for an extended period.
Headquartered in the United States, Palantir has leveraged artificial intelligence to gain substantial contracts with the National Health Service (NHS) and the Ministry of Defence (MoD). The company is experiencing rapid growth, with its stock price rising by 17% in early trading on Tuesday. This surge followed an optimistic revenue projection from CEO Alex Karp, who anticipates that global revenues will nearly double this year to approximately $8 billion (£5.95 billion), a figure he described as “otherworldly.”
According to a report released by the Centre for International Corporate Tax Accountability and Research (Cictar), Palantir’s effective global tax rate stands at just 1.4%, a stark contrast to its significant profit margins. The report highlights that in the previous year, Palantir did not incur any federal tax liabilities in the US and paid slightly over $2.5 million in state taxes.
Andrea Egan, General Secretary of the Unison trade union, which commissioned the report, remarked, “There is an urgent need for reform in systems that allow for large-scale tax avoidance. Companies like Palantir must contribute their fair share. It’s unacceptable for tech giants to profit immensely while evading substantial tax responsibilities. Public contracts should not be awarded to firms that deplete public resources.”
The UK represents Palantir’s largest market outside the US, with reported revenues of £247 million for 2024. The company employs around 750 staff members in the UK, making up a significant portion of its non-US workforce. By 2026, Palantir is projected to hold approximately £670 million in government contracts, including a £240 million agreement with the MoD awarded last December without competitive bidding.
Despite declaring profits exceeding £25 million in 2024, Palantir’s UK corporation tax payment was only £2.1 million, resulting in an effective tax rate of just over 8%. This is particularly notable given that the UK corporation tax rate was set at 25% for that year and remains unchanged.
Interestingly, the tax revenues collected from Palantir in the UK were less than those gathered from countries like South Korea, Japan, France, and Germany. Researchers suggest that one reason for this discrepancy may be Palantir’s practice of attributing its UK revenues to its US parent company, a method often referred to as transfer pricing. They noted, “A clear pattern is evident where Palantir shifts revenues and profits from European contracts back to its US headquarters to capitalize on the favorable tax environment there.”
While 26% of Palantir’s revenue originates from international clients, only 4% is reported as foreign income. This situation raises questions, as it appears contracts are signed with the US-based Palantir entities, which then pay service fees to their subsidiaries in other countries to fulfill the work.
For instance, Palantir reported £159 million in revenues through its UK company filings for 2024 but stated £247 million in its stock market documentation.
A Palantir representative defended the company’s tax practices, asserting that it adheres to tax regulations in all jurisdictions where it operates and that criticisms regarding transfer pricing lack credibility. They emphasized, “Transfer pricing is a standard practice utilized by large multinational corporations to allocate profits among different entities within the organization.”
The representative further explained that discrepancies in financial filings across various countries can occur, as it is common for US parent companies to record revenues generated abroad.
Additionally, Palantir manages to lower its tax liabilities by offering share options to its employees. This approach allows the company to decrease its tax obligations based on the value of shares when they vest. Although employees are subject to income tax on these options—often at higher rates—the strategy effectively shifts the tax burden from the company to its employees. A Palantir spokesperson indicated that this practice is a standard tax measure established under previous UK Labour government policies, aimed at providing employees with a stake in the business. “This ultimately leads to higher tax contributions, as corporation tax is set at 25%, while income tax, which is generally higher, is applicable on the shares,” they added.
In the US, Palantir has accumulated substantial tax credits from share options and losses carried forward from prior years, suggesting that at its current profit rates, the company may not need to pay federal income taxes for “nearly a decade,” according to the report.
Moreover, like many US firms, Palantir benefits from tax reductions enacted during Donald Trump’s presidency, which lowered the corporate tax rate from 35% to 21%. During his second term, Trump also negotiated an exemption from an international agreement aimed at imposing a minimum tax rate of 15% on large multinational corporations.
The report concludes that while Palantir earns profits in European markets, a significant portion of that revenue is funneled back to the US through internal payments. It suggests that while some related-party transactions may be justified, Palantir appears to be deliberately minimizing its taxable income and tax contributions across its European operations.
In response, Palantir stated that it had paid $148 million in UK employment taxes last year, a figure that includes employer national insurance contributions and some income tax remitted on behalf of employees.
