Published in «Journal of International Economic Affairs»1 / 2019
DOI: 10.18334/eo.9.1.40472

Formation of transfer price system between participants of a vertical-integrated company

Zykova Vita Evgenevna, Saint- Petersburg Mining University, Russia

Формирование системы трансфертных цен между участниками вертикально-интегрированной компании - View in Russian

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Abstract:
Rare-earth elements play an important role in most industries that use modern technologies, in particular, in aviation, instrument engineering and mechanical engineering, nuclear and wind energy, chemical, oil and glass industries, in electronics, as well as in the defense industry and the nano-technology products. The current state of the global REE market indicates the current imbalance of world production and consumption, which is concentrated mainly in China and is associated with low production costs and increasing needs for this type of raw materials in various areas. In this regard, at the moment, it is highly important to develop the full cycle of rare earth metals production (“from raw materials to technics”) in order to avoid resource dependence, potential shortages in the future, as well as turning Russia into a country of raw materials orientation and loss of production potential of innovative products with high value added based on this strategically important raw material. World experience shows that the only way leading to the formation of competitive industrial structures is the concentration of capital and production capacity, their integration according to the technological principle, which increases production efficiency by reducing production and transaction costs, indirect taxation of intermediate products. Given the current situation, the formation of vertically integrated structures, with such advantages as transfer pricing between participants, is the most appropriate strategy to solve the problem of import dependence and eliminate the risks associated with high volatility.

Keywords:

industry, rare earth metals, transfer pricing, value chain, vertical integration

JEL-Classification: Q01, Q38, Н5

Citation:
Zykova V.E. (2019). Formation of transfer price system between participants of a vertical-integrated company [Formirovanie sistemy transfertnyh tsen mezhdu uchastnikami vertikalno-integrirovannoy kompanii]. Journal of International Economic Affairs, 9(1). (in Russian). – doi: 10.18334/eo.9.1.40472.


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