Spain is taking steps to support its struggling olive oil industry by eliminating VAT on the product. Last year, the government reduced the tax to 5% from 10%, and now it will be removed entirely from 1 July. This decision was announced by Luis Planas, Spain’s Minister of Agriculture, Fisheries, and Food, during the country’s 2023 Food Consumption Report release.
The move will make olive oil part of a group of basic necessities that are subject to the ‘super-reduced’ rate permanently, such as bread, fruit, vegetables, and eggs. Planas shared on social media platform X, “Next Tuesday, the government will eliminate VAT on olive oil. We protect and encourage the consumption of this healthy food, a hallmark of the Mediterranean diet and the spearhead of the Spanish agri-food sector.”
The Spanish government’s goal with this action is to support its crucial olive oil industry and help maintain affordable prices. Olive prices have significantly increased in recent years due to a severe drought in the Andalusia region and supply chain inflation. While prices have decreased from last year’s peak, they remain close to an all-time high.
Andalusia is the main olive oil-producing region in Spain, accounting for approximately half of the world’s olive oil production. Recent data from the International Olive Oil Council (IOC) revealed that olive oil prices in Jaén increased by 37.2% for refined oil and 36.1% for extra-virgin olive oil compared to the previous year.
The Ministry of Agriculture, Fisheries, and Food stated that the abolition of VAT aims to protect and stimulate the consumption of olive oil, which has seen price hikes due to the drought and other factors. However, concerns have been raised by Unión de Uniones, a farmers’ organization in Spain. While they support the measure in general, they fear that farmers may bear the brunt of the financial impact.
Unión de Uniones has urged the Ministry of Agriculture to ensure that the benefits of the VAT removal are passed on to farmers positively. They emphasized that the measure benefits consumers but could have fiscal consequences for producers.
In light of these developments and the challenges faced by the olive oil industry, Spain’s decision to eliminate VAT on olive oil is a strategic move that aims to provide much-needed support to the sector.
