`Spain Set to Eliminate Value-Added Tax on Olive Oil Sales - Olive Oil Times
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Spain Set to Eliminate Value-Added Tax on Olive Oil Sales

By Simon Roots
Jan. 16, 2024 00:17 UTC

The Spanish gov­ern­ment has announced that olive oil will join the list of sta­ple foods exempt from VAT, which is sim­i­lar to sales tax, as part of its strat­egy to curb infla­tion amid the ongo­ing cost-of-liv­ing cri­sis.

The new mea­sures are set to be fast-tracked into law with no objec­tions expected from oppo­si­tion par­ties.

Although it has remained well below the increases seen in most other European coun­tries, recent infla­tion, caused by increased energy costs, global food insta­bil­ity and poor har­vests due to sus­tained droughts, has sig­nif­i­cantly impacted the cost of liv­ing in Spain.

See Also:Olive Oil Sales Slump in Spain and Italy Amid Rising Prices

According to data released by NielsenIQ in December, the aver­age annual house­hold shop­ping bas­ket surged by €800 between November 2022 and November 2023, with olive oil see­ing some of the high­est price hikes of 79 per­cent, 69 per­cent and 60 per­cent for extra vir­gin, vir­gin and non-vir­gin olive oil, respec­tively.

To com­bat this prob­lem, the Spanish gov­ern­ment led by Pedro Sánchez’s Spanish Socialist Workers’ Party (PSOE) intro­duced a raft of mea­sures in 2023, includ­ing the elim­i­na­tion of VAT on sta­ple foods such as fruit and veg­eta­bles, and a reduced rate of 5 per­cent on other food­stuffs such as pasta and olive oil.

The new res­o­lu­tion, expected to be passed into law by mid-January, will extend these mea­sures until June 30th while elim­i­nat­ing VAT on olive oil. Also added to the VAT-exemp­tion list are pasta and seeds.

The agree­ment was reached after extra­or­di­nary meet­ings between gov­ern­ment min­istries, agen­cies and sev­eral promi­nent inter­est groups rep­re­sent­ing olive oil pro­duc­ers, farm­ers, super­mar­kets and whole­salers.

Luis Planas, the min­is­ter for agri­cul­ture, fish­eries and food, said the price of food is ​“a prob­lem of great con­cern to cit­i­zens that the gov­ern­ment is try­ing to tackle with these types of mea­sures” and that ​“main­tain­ing the reduc­tion of VAT on food­stuffs is in the inter­est of all cit­i­zens.”

The mea­sures apply only to retail sales to avoid facil­i­tat­ing increased cor­po­rate profit mar­gins, poten­tially cre­ated by price rises after pass­ing the VAT-elim­i­nat­ing mea­sure. This is a mat­ter of estab­lished pol­icy with PSOE, which applied a sim­i­lar strat­egy to reduce fuel costs to motorists in 2022.

The move comes just as neigh­bor­ing Portugal, which elim­i­nated VAT on olive oil and almost 50 other food­stuffs last year, failed to renew or extend its tem­po­rary relief mea­sures, which expired January 4th.

Food secu­rity is a high pri­or­ity for Sánchez, who announced his government’s National Food Strategy dur­ing his recent pres­i­den­tial investi­ture debate.

According to Planas, the strat­egy will address the chal­lenges of main­tain­ing food pro­duc­tion in the con­text of cli­mate change and ensure food auton­omy for Spain in an ​“inter­con­nected world.”

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