Palantir, a controversial US data analysis software provider with multiple European government contracts, is paying relatively little tax in Europe, according to a new report.

Researchers at the non-profit Center for International Tax Accountability and Research (CICTAR) and the European Public Service Union (EPSU), a trade union federation, found that Palantir shrinks its regional tax bill by shifting some revenue abroad.

The software company, which was co-founded by billionaire Peter Thiel – a prominent backer of US President Donald Trump – has drawn controversy for years over its tech’s surveillance capabilities, which critics argue raise privacy concerns. Including on account of the customers Palantir chooses to work with – such as military, law enforcement and immigration services.

More recently, anti-progressive political views expressed by senior Palantir figures, like CEO Alex Karp, have raised eyebrows in Europe.

Despite all this, Palantir has been very successful at selling data analysis services to governments across Europe, including the UK, France, Germany, Sweden, Spain and Italy, among others.

Winning large government contracts has boosted its regional revenues but the report by CICTAR and EPSU alleges that it uses tax strategies that facilitate so-called “base erosion”, enabling it to reduce the amount of tax paid in Europe.

It does this by paying service fees to its US subsidiaries, adding deductible expenses that reduce taxable profits in Europe, per the report.

So while the effective tax rates on Palantir’s European operations are high it’s able to record low pre-tax profits – US tax rates, meanwhile, remain far lower than in Europe.

The practice also extends to Palantir’s UK operations, which sit outside the EU.

None of the practices the report details are illegal – and many large multinational companies structure their operations to reduce their tax liabilities.

But CICTAR and EPSU argue base erosion is particularly problematic in Palantir’s case, saying it’s being paid by governments for service provision while minimising its contribution to taxes that fund providing these services.

“Governments are contracting Palantir to strengthen national security – yet Palantir is undermining public services, including national economic security, by avoiding tax,” said Jan Willem Goudriaan, EPSU general secretary in a statement.

While Palantir is deeply embedded in regional public service provision, European alternatives are gaining more attention – such as France’s Chapsvision.

Germany’s domestic intelligence agency has said it will switch from Palantir to Chapsvision. In June, France also announced that its spy agency would start working with the local company.

(nl)