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How would it work?

Say an American multinational like Microsoft provides some SaaS. They have a division in Europe where their developers help make their products. They have offices, customer support, servers, etc. in Europe. Do they pay a partial tariff based on what fraction of the development of their software happened in the US? What if they sell the rights to the European version of their software to their European division?

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It would need to be a tax on money transfer to the American counterpart. Cash repatriation or payment for IP rights comes to mind.

Of course, the multinational could also use the funds to invest in Europe, build warehouse or commercial real estate or acquire European startups. I think they already do this to some extent to avoid US tax.

Using these to fund free credits to European cloud providers could be a good way to build up a local alternative. I think we underestimate the importance of free credits in the reliance on the 3 US hyperscalers, especially for startups.

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