Olive oil too expensive? Spanish government resets VAT to zero

The Spanish government has decided to abolish VAT on olive oil, the price of which has soared in recent years, due to a sharp reduction in harvests, in a context of extreme drought.

The change - to be adopted on Tuesday 25 June in the Council of Ministers - will take effect in July. The scheme the government will use is for essential products such as bread, fruit and vegetables, which benefit from a structural super-rate of 4%; but in times of high inflation, such as the current one, the rate can be reduced to zero.

"This is wonderful news for all Spaniards," commented government spokeswoman Pilar Alegría, in an interview with TV channel Antena 3. "In addition to lifting the wallets of Spaniards," she explained, "this measure will allow us to support the olive sector and continue to stimulate the consumption of a product that is so important for our country.

Spain supplies almost 50% of the world's olive oil (estimates by the International Olive Oil Council, based in Madrid) and is - together with Greece - the world's largest consumer of this product, with almost 14 litres per inhabitant per year.

The Spanish government had already reduced the VAT rate on olive oil from 10 per cent to 5 per cent in 2023, in order to combat rising food prices, but this measure has not produced the desired results. In recent times, the price has risen dramatically: last month olive oil was 63% more expensive than in May 2023 and three times more expensive than in January 2021. Phenomena that can be explained by the drastic drop in Spanish production in the 2022-2023 and 2023-2024 seasons, due to the extreme heat waves and lack of rainfall that the country, Andalusia in particular, suffered. In 2022-2023 production stopped at 660 thousand tonnes, compared 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.