Spain’s left-wing government has decided to abolish VAT on olive oil, the price of which has risen in recent years due to sharply reduced harvests amid extreme drought, the Spanish government told AFP on Friday.
Pedro Sánchez’s government will reduce the VAT on olive oil “to 0%” from July, integrating it “permanently into the group of essential products”, the ministry explained.
This is “great news for all Spaniards,” government spokesperson Pilar Alegría commented in an interview with Antena 3 TV channel.
In addition to “lightening the wallets of Spaniards”, she continued, the abolition of VAT on olive oil “will support the olive sector and continue to stimulate the consumption of such an important product for our country.”
This measure, which will be adopted on Tuesday during the next Council of Ministers, will allow olive oil to benefit in a “structural” way from the “super-reduced” VAT rate applied to essential products, the budget ministry specified.
Essential products, such as bread, fruit and vegetables, usually benefit from a 4% VAT rate in Spain. However, in times of high inflation, such as currently, this rate can be reduced to 0%.
The government had already reduced the VAT rate on olive oil from 10% to 5% in 2023 to combat rising food prices. But this measure did not prevent olive oil from continuing to rise.
Spain, which supplies almost 50% of the world’s olive oil, is, together with Greece, the world’s leading consumer of this product, with almost 14 liters per year. inhabitant per year, according to the International Olive Council (IOC).
However, according to the National Institute of Statistics (INE), the price of this product has increased recently: olive oil was 63% more expensive last month than in May 2023 and three times more expensive than in January 2021.
This phenomenon is explained by a decrease in production in Spain in the 2022-2023 and 2023-2024 seasons due to extreme heat waves and the lack of rainfall that the country, and especially Andalusia (south), suffered from the producing region.
In 2022-2023, Spanish production was thus limited to 660,000 tonnes, compared to 1.48 million tonnes in 2021-2022. In 2023-2024, according to the Ministry of Agriculture, it should not exceed 850,000 tonnes.
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