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The Spanish Government has decided to abolish VAT on olive oil, the price of which has increased dramatically in recent years, due to the sharp reduction in harvests, in a context of extreme drought.
The innovation – which will be adopted on Tuesday 25 June in the Council of Ministers – will take effect starting from the month of July. The regime the Government will use is the one envisaged for essential products such as bread, fruit and vegetables which benefit from a super-reduced structural rate of 4%; but in times of high inflation, like the current one, the rate can be reduced to zero.
“This is magnificent news for all Spaniards,” commented government spokeswoman Pilar Alegría, in an interview with the Antena 3 television channel. “In addition to lifting the wallets of Spaniards – she explained – this measure will allow us to support the olive sector and continue to stimulate consumption of such an important product for our country.”
Spain supplies almost 50% of the world’s olive oil (the estimates are from the International Olive Council, which is based in Madrid) and represents – together with Greece – the main world consumer of this product, with almost 14 liters per inhabitant per year.
The Spanish Government had already reduced the VAT rate on olive oil from 10% to 5% in 2023, to combat the increase in food prices, but this measure did not produce the desired results. In recent times the price has in fact increased dramatically: last month olive oil was 63% more expensive than in May 2023 and three times more expensive than in January 2021. Phenomena that find an explanation in the drastic drop in Spanish production in the 2022-2023 and 2023-2024 seasons, due to the extreme heat waves and lack of rainfall from which the country suffered, Andalusia in particular. In 2022-2023 production stopped at 660 thousand tonscompared to 1.48 million tonnes in 2021-2022 and for the current season the Ministry of Agriculture estimates that it should not exceed 850 thousand tonnes.
