This paper first suggests a methodology to help redefining the distribution of powers within a federation. It uses a test based on the subsidiarity principle and initially proposed by Pelkmans (2008) to discuss the distribution of powers between the Member States of the European Union and this latter. Then an application has been carried out for three competences – direct taxation, higher education and scientific research, and wage setting. It has been suggested that individual taxation should become the primary source of revenue for regions, while corporate income tax should be maintained as a federal competence. Concerning higher education and scientific research, on basis of the Swiss experience it has been concluded that higher education should be a regional competence while advanced education should be within the federal competences when it uses expensive equipments and it is more prone to economies of scale. As regard wage formation, it has been argued in favour of the centralisation of rules so as to avoid harmful competition among regional regulations. Finally, critical considerations about the method introduced and applied have been developed for three issues: the optimal dimension of infrastructures and public services, the asymmetries existing between a « bottom up » and a « top down » process, and the efficiency gains capacity to be a basis for a federation. JEL: H70, H77