Spain removes VAT on olive oil amid soaring prices

Spain removes VAT on olive oil amid soaring prices
Spain removes VAT on olive oil amid soaring prices

Spain’s left-wing government has decided to abolish VAT on olive oil, the price of which has soared in recent years due to sharply reduced harvests amid extreme drought, the Budget Ministry said on Friday. The government of Pedro Sánchez will bring back “at 0%” VAT on olive oil “from July”by integrating it “permanently in the group of basic necessities”explained the ministry.

It is “magnificent news for all Spaniards”commented government spokesperson, Pilar Alegría, in an interview with the Antena 3 television channel. “relieve the wallets of the Spanish”she continued, the abolition of VAT on olive oil will make it possible to “support the olive sector and continue to stimulate the consumption of a product so important for our country”.

This measure, which will be adopted on Tuesday during the next council of ministers, will allow olive oil to benefit significantly “structural” of the VAT rate “super-reduced” applied to basic necessities, said the Ministry of the Budget. Essential products, such as bread, fruit and vegetables, normally benefit from a VAT rate of 4% in Spain. But in times of high inflation, 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 those of olive oil from continuing to soar. Spain, which supplies nearly 50% of the world’s olive oil, is with Greece the world’s leading consumer of this product, with nearly 14 liters per 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 soared recently: olive oil was 63% more expensive last month than in May 2023 and three times more expensive than in January 2021.

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This phenomenon is explained by a fall in production in Spain during the 2022-2023 and 2023-2024 seasons, due to extreme heat waves and the lack of precipitation from which the country, and in particular Andalusia (south), suffered. , the main producing region. In 2022-2023, Spanish production thus capped at 660,000 tonnes, compared to 1.48 million tonnes in 2021-2022. In 2023-2024, it should not exceed 850,000 tonnes, according to the Ministry of Agriculture.

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