In an attempt to combat soaring prices and support one of the country’s most emblematic sectors, the Spanish government has announced the elimination of VAT on olive oil starting from July. The decision comes in response to severe economic pressures caused by the drastic reduction in crop yields and drought that has hit the nation in recent years.
Spain’s choice of VAT
According to what was reported by Il Sole 24 Ore, the Spain, the leading supplier of olive oil globally, is taking a drastic measure to encourage domestic consumption of this essential product. The International Olive Council, based in Madrid, confirms that Spain is responsible for almost 50% of the world’s olive oil production. This provision is part of the framework of the fiscal policies already applied to basic necessities such as bread, fruit and vegetables, which enjoy a super-reduced VAT rate of 4%, and which in periods of high inflation can be eliminated.
A sector under pressure
The decision to eliminate VAT on olive oil is not an isolated one. In previous years, the Spanish government had already reduced VAT on this product, but recent climate conditions and inflation have required further interventions. There Spaintogether with Greece, ranks first among global consumers of olive oil, with a per capita consumption of approximately 14 liters per year. Government spokeswoman Pilar Alegria said in an interview with the Antena 3 television channel: “This is wonderful news for all Spaniards. In addition to lifting citizens’ wallets, this measure will allow us to support the olive sector and continue to stimulate the consumption of such an important product for our country“.
The increase in olive oil prices has been notable. Just last month, the price of olive oil was 63% higher than in May 2023 and three times more expensive than in January 2021. This increase is attributable to a number of factors, including unfavorable weather conditions that have drastically reduced crop yields. The drought has had a devastating impact on production, resulting in reduced supply and increased prices.
The Spanish government’s decision to abolish VAT on olive oil is set to generate significant economic and social implications. On the one hand, this measure is expected to ease the financial burden on consumers by making olive oil more accessible to Spanish families. On the other hand, it is hoped that the olive sector will receive a positive boost, encouraging the resumption of production activities and supporting local producers.
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