Appendix 1: Government Response
The Government welcomes the Business, Innovation
and Skills Committee (BISCOM) report on Open Access (OA). Government's
OA policy is based on the principle that the taxpayer should have
free access to the published findings of publicly funded research.
Better access should result in a more productive research process,
greater use of research findings and consequently more economic
and social benefits from research.
The Committee's report has helpfully acknowledged
that the Government is right to make publicly funded and published
research freely and openly available and that in the long term
the most effective form of OA will be Gold OA. Government was
pleased to note that there is no distinction to be made between
the Government's and BISCOM's direction of travel for OA. The
envisaged final destination is likely to be what the Finch Group
termed a 'mixed economy' of Gold and Green OA, the proportions
of which the decisions of researchers and behaviour in the market
will decide.
Government's approach, therefore, amounts to a subtle
re-engineering of the present market. By 'nudging' the flow of
revenue for the publishing industry towards it becoming income
from Article Publication Charges (APCs) for Gold OA, decisions
made by individual researchers on the payment of APCs for publication
in the journal of their choice will eventually create a more competitive
'substitute good' research publications market. This change should
help to moderate the historical trend of the current 'complementary
good' market that has witnessed increasing costs to libraries
as referred to in the Committee's report.
The approach that Government took throughout the
Finch Group process was intended to recast relationships and establish
shared values and objectives to effect real change in the public
interest. Whilst, as we keep saying, we are on a journey, the
evidence so far is encouraging. David Willetts was recently invited
by Janet Finch to the long-standing final meeting of the Finch
Group to reflect on progress that has been made. Janet Finch will
be publishing her independent report on progress incorporating
discussions at that meeting. The Publishers Association positively
reported that, on the basis of a recent survey conducted amongst
its members, within only a year:
- 70% of journals now publish Gold or include
a Gold OA option;
- Of these, 82% allow the author to choose
a CC-BY licence;
- 96% of journals have an embargo period of
24 months or less;
- 64% of journals have an embargo period of
12 months or less.
This illustrates the extent to which the Government's
policy already is being complied with, but there is no room for
complacency in the UK research publications industry and scope
for further improvements are discussed below. RCUK's review in
late 2014 will be able to independently report on that, but the
journey is underway.
As a result of the Finch Group's work, a programme
devised by publishers, through the Publishers Licensing Society,
and without funding from Government, will culminate in a Public
Library Initiative. A technical pilot was successfully started
on 9 September 2013 (see http://exchanges.wiley.com/blog/2013/09/18/uk-public-libraries-initiative-launches-technical-pilot/).
This further demonstrates the industry's commitment to OA.
In December 2013 Government will also be announcing
the official launch of the Research Councils' Gateway to Research
(see www.rcuk.ac.uk/research/Pages/gtr.aspx). This will demonstrate
the enthusiasm that our Research Councils and their research communities
have for sharing their knowledge in the interest of economic growth
and enhancing our quality of life. These various initiatives have
stemmed from OA.
The Government's responses below should reassure
the Committee that we share a common objective and vision for
the OA journey that Government and RCUK have successfully embarked
the UK upon.
DAVID WILLETTS
12 November 2013
Current Open Access Policy in the UK
We are disappointed by the Government's conclusion
that "development of infrastructure for repositories will
primarily be a matter for institutions themselves", not least
because the Government has spent £225m on repositories in
recent years. We recommend that the Government takes an active
role in working with the Joint Information Systems Committee and
the UK Open Access Implementation Group to promote standardisation
and compliance across subject and institutional repositories.
(Paragraph 25)
As stated in evidence to the Committee, repositories
are being proactively developed and supported throughout the UK
research community. Examples cited were the Economic and Social
Research Council's (ESRC's) Research Catalogue and the Department
for International Development's R4D (Research for Development).[1]
Similarly the Medical Research council (MRC) requires research
papers to be placed in Europe PubMedCentral.[2]
The organic growth of repositories extends to international coordination
and co-operation between repositories. The COAR (Confederation
of Open Access Repositories) plays a leading role and has a number
of UK members including EDINA which represents the interests of
Jisc and the UK repository infrastructure.[3],[4]
Within the UK Jisc is developing a set of services
to improve the performance of the UK's shared repository infrastructure
in partnership with EDINA and other delivery partners including
MIMAS (a Jisc data centre at Manchester University), the Open
University and Nottingham University, but all led and managed
by Jisc. This role for Jisc has resulted from a sector consultation
and the need to address governance and coordination across the
multiple partners whilst pursuing its objective to improve the
national repository infrastructure, promote good practice and
greater interoperability.
The Government, through HEFCE and the Research Councils,
will continue to encourage Jisc, the Open Access Implementation
Group (OAIG) and others to promote standardisation and compliance
across subject and institutional repositories. This is what the
Government means by "the development of infrastructure for
repositories being primarily a matter for the institutions themselves".
Work is already underway and it will by no means be a straight
forward task. Taxonomies will require universal agreement and
views within the large and dispersed academic community will differ.
Even so, future work of the Governments' Research Sector Transparency
Board (RSTB) and activities stemming from the National Data Strategy
will also serve to improve the UK's repository infrastructure.
The Committee is right to point out that Government
is making a substantial investment in repositories. This investment
includes the necessary infrastructure to access the growing volume
of data being generated by the research community, as illustrated
by ELIXIR a new £75 million repository for bioscience data
which I officially opened at Hinxton, near Cambridge, on 28 October
2013.[5]
Government shares the Committee's concern, therefore,
that some measure of coordination could help the UK to secure
the best use of its investment in repositories but the Government
would maintain that it does not want to inadvertently stand in
the way of the collaborative progress already being made by many
institutions in a rapidly developing high technology field.
Strengthening Deposit Mandate to Increase Open
Access
We recommend that HEFCE implements its proposals,
and maintains the strength of its proposed immediate deposit mandate
in the appropriate institutional repository as a pre-condition
of Research Excellence Framework eligibility. (Paragraph 30)
HEFCE will be finalising its proposals including
its immediate deposit mandate in the light of its recent consultation.
As stated in HEFCE's consultation document the use of repositories
will be an important feature of OA as applied to the Research
Excellence Framework (REF) and this is entirely consistent with
and complementary to the Government's and RCUK's OA policy.
RCUK should build on its original world leading
policy by reinstating and strengthening the immediate deposit
mandate in its original policy (in line with HEFCE's proposals)
and improving the monitoring and enforcement of mandated deposit.
(Paragraph 31)
Government welcomes how Research Councils and Funding
Councils have promoted deposit in repositories as an important
component of their OA policy. RCUK have balanced the objective
of timely OA to all users with the need to respect, through a
mutually acceptable embargo period, sustainable business models.
Publishers and Learned Societies alike who play an important part
in the administration of the peer review process and, particularly
in the case of Learned Societies, cultivating knowledge and skills
in the sectors they represent, have welcomed RCUK's approach.
Open Access Worldwide
Government and RCUK should rigorously monitor
global take up of Gold and Green and international developments
in open access policy worldwide. This data should be used to inform
both the reconvening of representatives of the Finch working group
in the Autumn of 2013, and RCUK's review of its open access policy
in 2014. (paragraph 35)
Government and RCUK are developing a greater understanding
of the take up of Gold and Green OA internationally. This is becoming
available through the research literature itself, such as the
analysis provided by Laakso and Bjork, but also from the future
International Comparative Performance of the UK Research Base-2013,
which will include analysis of the trends in international take
up of Gold and Green OA.[6]
An international perspective will also be gleaned from follow
up to the recent meeting of G8 Science Ministers, discussions
with the Commission and bilaterals. This will feed into future
reviews of OA policy.
The Transition to Open Access: Costs and Hidden
Costs
RCUK has undertaken to publish data on "how
the open access block grants are being used, specifically the
numbers of research papers which are being made open access through
payment of an APC and the actual APCs being paid to publishers".
We recommend that RCUK also requires data on subscription expenditure
from UK HEIs to establish the impact of its policy on subscription
purchasing and pricing. (Paragraph 41)
RCUK will give due and independent consideration
to this recommendation.
Embargo Periods
The stated policy objective of the Government
and RCUK is to increase access to publicly funded research. Long
embargoes are a barrier to access. We recommend that the Government
and RCUK revise their policies to place an upper limit of 6 month
embargoes on STEM subject research and up to 12 month embargoes
for HASS subject research, in line with RCUK's original policy
published in July 2012. (Paragraph 50)
A re-engineering of the research publications market
entails a journey not an event. Necessarily it requires a period
of transition for the process of change. Longer embargo periods,
as illustrated below, play an important part under some circumstances
during the transition process.
Government and RCUK believe that the embargo periods
for Science Technology Engineering and Mathematics (STEM) and
the Arts Humanities and Social Sciences (AHSS) as discussed in
the RCUK's Guidelines published on 8 April 2013 need to take account
of how best to achieve both timely free access and a sustainable
publishing business model during a five year transition period.[7]
This is the basis for the UK's OA Decision Tree (which results
from agreements reached by Government, Research Councils and the
publishers in line with the Finch Group's recommendations). The
UK OA Decision Tree, set out below, reflects the UK's agreed approach
to embargo periods for the publication of publicly funded research.
The only exception to this general rule, which the
Government fully supports, is the treatment of biomedicine and
for this the RCUK Guidelines state:-
"Research papers in biomedicine should be published
immediately, or with an embargo period of no longer than six months,
as has been the MRC's mandated policy since 2006."
Given the importance of ensuring that UK open
access policy does not result in reduced access in the UK or worldwide,
the Government and RCUK must monitor and evaluate the impact of
their open access policy on embargo lengths imposed by UK publishers.
The impact on different subject areas must also be carefully monitored.
That information must inform future meetings of the Finch Group
and RCUK's reviews of open access policy. (Paragraph 51)
Government believes that the first signs of the impact
of its OA policy on embargo periods have been beneficial. The
Government is aware of the concerns raised by the Committee relating
to the behaviour of one publisher which interpreted the above
embargo periods as requirements, whereas they actually indicate
maxima durations. Publishers are free to opt for shorter embargo
periods as they wish. More generally, as stated in David Willetts'
letter of 20 June 2013, UK policy already is leading to shorter
embargo periods for Green OA. Wiley's 1,600 titles, before the
RCUK implementation guidance came into effect in April 2013, would
sign a copyright transfer agreement with no Green OA option. All
of Wiley's titles now carry a Green OA option and have adopted
the required embargo periods. Similarly, Taylor Francis report
that the Finch Group's recommendations and the RCUK's and Government's
OA policy provided the impetus for them to ensure that such a
Green OA option was available across their approximately 1,700
titles.
The Government and RCUK will welcome evidence from
the research community on how Government and RCUK policy is impacting
on embargo lengths imposed by UK publishers and such findings
will be considered for the RCUK's review in late 2014.
Levels of Article Processing (Publication) Charges
We recommend that the Finch working group commissions
an independent report on APC pricing, which should include average
APC prices of pure Gold journals and hybrid journals, domestically
and internationally. (Paragraph 58)
The Finch Group held its final meeting on 24 September
2013, but its former members will continue to take an interest
in such things as APC prices and will share their information
with RCUK to inform its review in late 2014.
We strongly support the recommendation of the
Science and Technology Committee of the House of Lords that the
Government undertake a full cost-benefit analysis of open access
policy, including the impact on different subject areas. This
analysis must include data to reflect actual rather than projected
costs during the transition period. (Paragraph 59)
The Government already has taken the initiative to
have a study undertaken to determine the feasibility of a full
cost benefit analysis (CBA) of the Government's OA policy. A contract
is being awarded to Matrix for this and the scope of work for
their feasibility study will include:-
- Setting up a CBA framework structured around
the three policy options - Do Nothing; Green option; and Gold
option.
- Carrying out a methodological and empirical
literature review, identifying gaps and developing a feasible
plan to fill them.
- Drafting a report that includes their assessment
on feasibility of a CBA, proposals to fill key evidence gaps setting
out how they will enhance the robustness of the CBA, and a provisional
CBA assessment (if feasible) based on extant data and evidence
with appropriate caveats about robustness.
Affordability of APCs for Authors and UK Research
Organisations
We are concerned that the expectation appears
to be that universities and research organisations will fund the
balance of APCs and open access costs from their own reserves.
We look to the Government and RCUK to mitigate against the impact
on university budgets. The Government must not underestimate the
significance of this issue. (Paragraph 64).
Publication of the results of publicly funded research
is an integral part of the research process. Government fully
recognised this to be the case and within the constraints of a
flat cash science budget supported the decision by Research Councils
to make available £17 million in 2013/14 (rising to £20
million in 2014/15) of dedicated funding to create over 100 HEIs'
OA Publication Funds. This was in addition to an initial £10
million made available to 30 HEIs to 'pump-prime' the process.
The sums of £17 million and £20 million
were based on RCUK's initial assumption that 45 per cent of the
26,000 RCUK funded papers produced each year would be Gold OA
and require funding for APCs. The fact that the revised RCUK position
is for the same 45 per cent target to now include both Green and
Gold OA should mean that the expected demand for APC funding could
fall. Hence, HEIs have received adequate funding from RCUK, given
that the original allocations of £17 million and £20
million have remained unchanged. To the extent that other non
RCUK publicly funded research requires funds for the payment of
APCs, HEFCE and other Funding Councils have agreed that QR funding
may be used for this purpose at the discretion of the HEIs. Hence,
HEIs have access to the necessary public funds to cover the cost
of implementing the Government's and RCUK's OA policy.
The Government is aware of the reluctance of some
HEIs to promote the Government's preference for Gold OA, on the
grounds that it represents a reduction in funding available for
research, but the cost of the Government's funded OA policy is
estimated to be less than £50 million per annum or approximately
one per cent of the science budget (which totals £4.6 billion
per year). This is a marginal cost expected to be outweighed by
the benefits to the economy arising from direct innovation and
spill over benefits. The social rate of return for investment
in R&D is typically in the range of 20 to 50 per cent per
annum and could be enhanced by improved access, through OA, to
the results of research.[8]
The Shared Ultimate Goal of Full Gold Open Access
The Government and RCUK should clarify that Gold
open access is the ultimate goal of, rather than the primary route
to, their open access policies. We recommend that the Government
and RCUK reconsider their preference for Gold open access during
the five year transition period, and give due regard to the evidence
of the vital role that Green open access and repositories have
to play as the UK moves towards full open access. (Paragraph 70)
The Government and RCUK have consistently indicated
that the transition to a Gold Open Access approach to publishing
publicly funded research entails a journey rather than a single
event. It holds the long term promise of a more competitive (substitute
good based) research publications market and stands to stimulate
innovation both within the publications industry and more generally.
It will not be possible to reach the desired destination of much
greater, free and unrestricted access to published research results
without first setting a direction of travel. Government and RCUK
policy with an expressed preference for Gold OA does that.
Decisions by researchers and the responsiveness of
the publishing industry will determine whether Gold OA proves
to be the prime route to OA, as Government and RCUK would prefer
to be the case. Analysis of global research publication trends
by Laakso and Bjork (published in October 2012 and cited above)
indicates that: "Approximately 17% of the 1.66 million articles
published during 2011 and indexed in the most comprehensive article-level
index of scholarly articles (Scopus) are available OA through
journal publishers, most articles immediately (12%) but some within
12 months of publication (5%)." This suggests that Gold OA,
at 12 per cent, is now proving to be the dominant form of OA.
Not all Gold OA requires payment of an APC but the same study
found that about 49 per cent of all the OA articles published
in 2011 did require payment of an APC. Hence, the Government's
and RCUK's policy preference for Gold OA, decided ahead of the
findings from this study, appears to be going with, rather than
against, the grain of an underlying global trend.
What the final destination looks like is not yet
clear (in so far as the decision on where to publish remains with
researchers and therefore the eventual mix of Gold and Green published
research is speculative at this stage). Even so, the Government
and RCUK would maintain that the merits of Gold OA (immediate,
final published version, compatibility with data mining, unrestricted
access and re-use, with attribution) mean that it is preferred
to Green OA.
Green OA will continue to be an important complement
to Gold OA. Furthermore, it should not be assumed that repositories,
which Government considers to be important, are only relevant
to Green OA with which they frequently associated. The use of
repositories is a feature of both Gold and Green OA. In terms
of the sustainability of long term access to published research
and data it is important that this should be the case. Institutional
repositories, such as in HEIs, may prove to be longer lived than
those owned by some publishers whose financial viability will
be subject to their continued competitiveness in the market. Continued
access to valuable research results will be needed. The additional
use of institutional repositories, as promoted by both RCUK and
Funding Councils, provides a valuable degree of built in redundancy
in the national information and data infrastructure.
RCUK's current guidance provides that the choice
of Green or Gold open access lies with the author and the author's
institution, even if the Gold option is available from the publisher.
This is incompatible with the Publishers Association decision
tree, and RCUK should therefore withdraw its endorsement of the
decision tree as soon as possible, to avoid further confusion
within the academic and publishing communities. (Paragraph 71)
As discussed above the UK OA Decision Tree sets out
clearly the direction of travel. This is not incompatible with
researchers having a free choice as to whether or not to follow
the preferred path. Government and RCUK hope they will choose
to do so. Government welcomes RCUK retaining this decision tree.
It has been agreed by all affected parties, and does not simply
reflect the publishers' position, but the consensus position arrived
at by members of the Finch Group.
Achieving a Functional Market
If RCUK and the Government continue to maintain
their preference for Gold, they should amend their policies so
that APCs are only paid to publishers of pure Gold rather than
hybrid journals. This would eliminate the risk of double dipping
by journals, and encourage innovation in the scholarly publishing
market. (Paragraph 77)
Government understands that precisely this approach
has been adopted in Germany, where hybrid journals are believed
to not be allowed. In 2012, the UK opted for a different approach,
which has also proven to reflect the position of the Global Research
Council published in May 2013.[9]
The Government's approach allows for the publication of Gold OA
papers in subscription based journals, making them so called 'hybrid'
journals, as well as publication in pure Gold OA journals. Government
believes that by doing so the rate of adoption of Gold OA by publishers
and researchers alike will accelerate. Evidence quoted above from
the Publishers Association suggests that this is already proving
to be the case. Researchers would be disappointed to have publication
in their favoured journals denied to them if they opt for Gold
OA and publishers would not want the inefficiencies, or brand
dilution effects, of always putting publication of Gold OA material
in to a new and separate journal.
Having said all that, Government is concerned to
see much greater movement in the market to improve on the transparency
of how revenue from APC payments is impacting on subscription
rates charged to those institutions making serious efforts to
comply with the Government's and RCUK's preference for Gold OA.
Publishers consider subscription charges and APCs to be separate
considerations for different offerings. To the institutional customer
faced increased total publication costs they are related. Hence,
HEIs implementing Gold OA understandably feel that publishers
are 'double-dipping'.
Government does not consider it appropriate for publishers
to rely on retrospectively amortising their APC revenue to discount
global subscription rates, as some now do. This may address 'double-dipping'
in one sense, (no increase in total revenue to the publisher)
but it does nothing to address the concerns of research intensive
individual institutions, wherever they are located around the
world. Such institutions paying APCs for Gold OA publication in
particular journals should see some related and proportional discount
in their total subscription fees, with the same publisher, to
avoid them disproportionately funding the translation to Gold
OA.
Government welcomes the initiative taken by the Royal
Society of Chemistry in this regard, but looks to the publishing
industry to immediately develop other innovative and sustainable
solutions to addressing the 'double-dipping' issue as perceived
by institutions. By doing so Government believes that publishers
will be seen to be rewarding rather than inadvertently being perceived
to be penalising early adopters. The final obstacle to a greater
take up of Gold OA would be removed enabling universal acceptance
of 'hybrid' journals.
Government will look for firm evidence of such initiatives
by publishers in RCUK's independently chaired review to be held
in late 2014.
The evidence we saw suggested that authors have
little price sensitivity when they choose a journal in which to
publish. We recommend that RCUK amends its policy to allow grant
funds to be used for publishing charges, which is by far the most
common model internationally. This would re-introduce price pressure
by prompting authors to make an informed decision on where to
publish. We recommend that the Government endorse genuine price
transparency from publishers so that it is clear to subscribers
which services and costs are and are not included in the overall
subscription price, enabling subscribers to assess the costs and
benefits of purchasing. (Paragraph 78)
Government is not aware of any evidence that including
publishing charges in grant funds has any positive effect on researchers
experiencing price pressure. Indeed, this has been the arrangement
to date until the introduction of block grants by RCUK in April
2013 for Publication Funds. During the period of previous arrangements
the Committee, in its report (at Figure 1), has been able to point
to significant growth in the cost of library subscriptions relative
to the CPI.
A more structured approach that strategically 'nudges'
the research publications market towards individual substitute
good type transactions using Gold OA is needed to introduce a
more systemic awareness of price sensitivity. Whilst the Committee
is right to suggest that individual authors need to be more exposed
to price pressure for the publication of their work, the process
by which researchers choose how best to pay for publication should
be the result of a collegiate exercise within HEIs. Each HEI will
have different publication strategies and priorities and Government
welcomes the fact that RCUK wisely decided to allow this process,
involving the management of Publication Funds, to be determined
locally within HEIs and not to try to adopt a 'one size fits all'
type of approach.
Government agrees with the Committee that there should
be price transparency for APCs. Publishers will be required to
publish their APC price list to qualify for the payment of APCs
using public funds.
We strongly agree with the recommendations of
the House of Commons Science and Technology Committee and the
Finch Report that the Government should work to introduce a reduced
VAT rate for e-journals. Given the emphasis the Government has
placed on the benefits of increasing open access, the Government
should seek a derogation on this point from the European Commission.
(Paragraph 79)
The Government has already considered this issue
in depth and Treasury have issued a public statement (annexed
for completion).
We further recommend that the Government indicates
clearly that non-disclosure clauses should not be included in
publishing contracts which involve public funds. In the first
instance, this should be achieved through dialogue between Government,
publishers and universities. If the use of non-disclosure clauses
persists, then the Government should consider referring the matter
to the Competition Commission. (Paragraph 80)
Government agrees that HEIs should not be required
by publishers to accept non-disclosure clauses in publishing contracts
which involve public funds. The Government will discuss this issue
with publishers and representative bodies. If what is considered
to be inappropriate use of non-disclosure agreements is evident
discussions will be held with the Office of Fair Trading (OFT)
to seek their advice and whose responsibility it would be to make
any referral to the Competition Commission (currently transiting
to become the Competition and Markets Authority which will bring
together the Competition Commission and much of the OFT).
Licensing
We recommend that the Government reports the outcomes
of its further investigations into licensing to us and communicates
them clearly through RCUK as soon as possible in order to assuage
concerns of authors and their institutions. (Paragraph 85)
Where public funds are used for payment of an APC
for the publication of publicly funded research the use of a Creative
Commons, CC-BY licence is the expected requirement.[10]
RCUK has in hand discussions with stakeholders on its preferred
approach to the use of licences. The Government will be pleased
to report RCUK's agreed conclusions to the Committee.
RCUK should monitor complaints from authors and/or
their institutions about breach of licensing conditions or inappropriate
re-use of content, consider these at its review of open access
policy, and identify appropriate action if necessary. (Paragraph
86)
This is a matter for RCUK, but, Government would
not expect RCUK to 'police' the relationship between researchers/authors,
publishers and third parties in relation to any possible breaches
of license terms and conditions entered in to by researchers/authors
and publishers. Government would expect RCUK to be interested
to know how well OA licensing is working in practice and this
will be a feature of RCUK's review and any appropriate action
will be identified if necessary.
Open Access Innovation and Growth
We believe that BIS must review its consultation
processes to ensure that lessons are learned from the lack of
involvement of a broader range of businesses, particularly SMEs,
in the formation of open access policy. It is particularly important
to ensure that future policies and initiatives (for example Gateway
to Research) take into account the specific needs of the communities
they are intended to serve, to ensure optimum functionality and
a more efficient use of public funds. (Paragraph 91)
BIS is always keen to ensure that the interests of
SMEs are considered in the development of its policies and strategies.
SMEs as potential users benefit from the proposal to provide them
with expanded free access to published publicly funded research.
The interests of SME publishers was considered to be represented
through several Learned Societies included in the Finch Group.
In relation to the Gateway to Research (GtR), SMEs
have been directly engaged throughout as they are the target users
for the facility. This representation has included SME participation
in the presentation to Ministers of the beta version launched
in November 2012, SME participation in workshops held with users
in August 2013 and direct involvement by SMEs in a planned 'hack
day' in November to ensure that the GtR is tailored to the needs
of SMEs. This event is being organised with Nesta, whose activities
are very much directed at the needs of SMEs.
Annex
VAT E-JOURNALS
Treasury Note for the House of Commons - Business
Innovation and Skills Committee
Introduction
The Business Innovation and Skills Committee took
evidence from Rt Hon David Willetts MP and Ron Egginton on 14
May 2013. Questions 154 to 157 considered the topic of VAT on
e-journals. The Chair, at Q 156, expressed a wish to see the detailed
explanation of why it is not permitted for the United Kingdom
to have a zero rate or reduced rate of VAT on e-journals.
Background
ZERO RATES
When VAT was introduced in the United Kingdom in
1973, the European legislation (contained in the First and Second
VAT Directives) allowed considerable flexibility in the coverage
of the tax. This meant that it was free to define which items
were:
- taxed at the standard rate,
- defined as exempt (where suppliers are unable
to recover the VAT they incur), and
- wholly relieved of the burden of VAT through
the zero rate.
It was against this background that books and newspapers,
previously relieved of Purchase Tax, were zero rated when VAT
was introduced in 1973.
In 1978 the Sixth VAT Directive replaced the Second
Directive, this had been negotiated by all the member states at
the time with unanimous agreement. The Sixth Directive was more
prescriptive in what could be exempt from VAT, and only allowed
a very narrow scope for domestic zero rating.
However it allowed member states to continue to exempt
or zero rate goods supplies where the relief was already in place.
The Sixth Directive was amended in 1992 to make it clear that
zero rates in force on 1 January 1991 could be retained, but extending
or creating new zero rated items was not permitted. When the Sixth
Directive, including all its amendments, was consolidated into
Directive 2006/112 "The Principal VAT directive", these
provisions were restated. This means that the United Kingdom is
able to retain the zero rates it has, but is not able to extend
their scope.
REDUCED RATES
The Principal VAT Directive allows member states
to have one or two reduced rates set at a minimum of 5%, but the
scope of reduced rates is restricted to the list of goods and
services set out in Annex III. Books and newspapers are included.
However electronically supplied services are specifically excluded
from the reduced rate.
ELECTRONICALLY SUPPLIED SERVICES
When the provisions of the Sixth VAT Directives were
negotiated in the 1970's the concept of supplying services electronically
was at best in its infancy, so little regard was taken. However
as broadcasting services and electronically supplied services
developed, it was necessary for member states to consider how
these should be taxed. The result was that, with effect from 1
January 2003, electronically supplied services were specifically
mentioned and excluded from the scope of the reduced rate.
In addition, in order to provide clarity and uniformity
as to what constituted electronically supplied services, the member
states unanimously agreed the wording of a Council Regulation
in 2005 that defined and listed examples of electronically supplied
services.
The regulation includes "subscription to online
newspapers and journals", and "the digitised content
of books and other electronic publications", so these items
must be taxed at the standard rate.
Prospects for change
It can be seen that there has been an open debate
among member states, which has focused solely on the issue of
defining the scope and VAT treatment of electronically supplied
services, and these services include the provision of online digitised
content. The unanimous agreement on that treatment is that standard
rate VAT should apply.
There are several factors that count against the
prospects for any change:
- The European commission has a long term
and firm commitment for broad scope of VAT at the standard rate,
and would resist any proposal for another reduced rate. In order
to introduce a new reduced rate, a European Commission proposal
would be needed, and given its long term commitment the prospects
of such a proposal are remote.
- The scope of the United Kingdom's zero rates
and reduced rates is under continuous scrutiny of the European
Commission, so to raise the issue of extending the reduced rates
even to online journals, is considered high risk and politically
sensitive, even mentioning the issue may lead to adverse reaction
and additional pressure from the Commission to broaden the scope
of our standard rated tax base.
Against this background we do not consider the UK
should pursue a policy of re-opening the issue of reduced and
zero rates.
HM Treasury
12 June 2013
1 See http://r4d.dfid.gov.uk/ Back
2
See http://europepmc.org/ Back
3
See http//:edina.ac.uk/ Back
4
Historically Jisc stood for Joint Information Systems Committee
but over the last decade the organisation has evolved and as a
company is now known as Jisc. See http://www.jisc.ac.uk/ Back
5
See http://www.elixir-europe.org/ and http://www.sanger.ac.uk/about/press/2012/120613-ebi.html Back
6
See www.biomedcentral.com/1741-7015/10/124 Back
7
See www.rcuk/ac/uk/documents/documents/RCUKOpenAccessPolicy.pdf Back
8
Salter & Martin's (2001) literature review suggests that the
social rate of return (SRR) to research is typically 20-50%. See
http://in3.dem.ist.utl.pt/master/stpolicy03/temas/tema6_1a.pdf Back
9
The Global Research Council includes 70 Heads of Science and Research
Councils from around the world. See http://globalresearchcouncil.org/meetings/2013-meeting Back
10
Creative Commons BY licence allows you the reader/user to share
(copy distribute and transmit the work) and remix (adapt the work)
and make commercial use of the work. This is with the proviso
that you must attribute the work in the manner specified by the
author or licensor (but not in a way that suggests that they endorse
you or your use of the work.) See http://creativecommons.org/licenses/by/3.0/. Back
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