Regulierung des Standortwettbewerbs durch Beihilfenrecht oder Subventionssteuern?

We discuss the pros and cons of the regulation of economic development policies of local authorities at the central level of a federal state and give special attention to European state aid control. In a first step we consider the influence of European state aid law on the efficiency of the spatial distribution of economic activities. Subsidy taxation is proposed as an alternative to regulatory instruments for the control of economic development measures by peripheral authorities. We scrutinize this idea and focus on public finance criteria for the evaluation of tax-systems: political feasibility, allocative and distribu-tive effects. The paper shows that a subsidy tax is capable of solving a lot of the problems inherent in European state aid law while allowing fine-tuning the intensity of inner-European competition for direct investment.