`Spain's Olive Oil VAT Reduction Might Not Be Sufficient to Halt Price Rises - Olive Oil Times
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Spain's Olive Oil VAT Reduction Might Not Be Sufficient to Halt Price Rises

By Paolo DeAndreis
Jan. 17, 2023 15:21 UTC
Summary Summary

The Spanish gov­ern­men­t’s tem­po­rary VAT cut on cook­ing oils, includ­ing olive oil, aims to alle­vi­ate the impact of high infla­tion on fam­i­lies’ shop­ping expenses, but some believe it will not be enough to stop ris­ing olive oil prices in Spain. Farmers and indus­try offi­cials have expressed con­cerns that the VAT reduc­tion may not off­set increas­ing pro­duc­tion costs, such as energy and logis­tics, which are affect­ing the olive oil sec­tor.

The tem­po­rary value-added tax (VAT) cut intro­duced by the Spanish gov­ern­ment on olive and all other cook­ing oils has been seen by many as a pos­i­tive move.

Proponents hope it will cur­tail the effects of high infla­tion on fam­i­lies’ shop­ping bas­kets. Still, some observers say the VAT cut will fall short of halt­ing ris­ing olive oil prices in Spain.

Starting January 1st and last­ing until June 30th, the VAT of all cook­ing oils was reduced from 10 to 5 per­cent. The same reduc­tion has been applied to pasta, while other essen­tial foods such as milk, pota­toes, eggs, veg­eta­bles, fruit, legumes and bread had their VAT reduced from four to zero per­cent.

See Also:Olive Council Forecasts Significant Production Decline

Farmers and offi­cials have said that ris­ing pro­duc­tion costs, such as energy, fer­til­iz­ers and logis­tics, under­cut the VAT reduc­tion.

On top of that, olive oil pro­duc­ers high­lighted the impact of the tax on non-reusable plas­tics, which came into force on January 1st, on the sec­tor.

“We would have pre­ferred a zero-VAT, which is applied to other basic foods. In the case of olive oil, such reduc­tion would be jus­ti­fied by the unsat­is­fac­tory har­vest and other fac­tors which exert a rel­e­vant role [on the sector’s costs],” Rafael Sánchez de Puerta, pres­i­dent of the Cooperativas Agroalimentarias in CĂłrdoba and direc­tor gen­eral of DCOOP, told ABC.

While applaud­ing ​“any mea­sure that helps cur­tail prices,” Sánchez de Puerta noted that the government’s VAT cut is unlikely to impact sales sig­nif­i­cantly, as it does not lower pro­duc­tion costs.

Pedro Barato, pres­i­dent of the Interprofessional Organization of Spanish Olive Oil, told Oleorevista that ​“olive oils are cur­rently sub­ject to enor­mous ten­sions on the world mar­kets due to the fore­cast for a way lower olive oil yield, which is con­nected to the Mediterranean drought.”

The lat­est Ministry of Agriculture, Fisheries and Food esti­mates show that olive oil pro­duc­tion in Spain will fall short of 770,000 tons this year, about 50 per­cent lower than last year’s yield.

Barato also noted that the elim­i­na­tion of VAT would be ideal, con­sid­er­ing the many chal­lenges the sec­tor faces.

In a ded­i­cated report, El Mundo noted that the VAT reduc­tions are evenly applied in dif­fer­ent areas of the coun­try. It also showed how some food retail­ers had raised food prices for other sta­ple prod­ucts not part of the VAT reduc­tion, which under­cuts the sup­posed advan­tages of the VAT reduc­tion for the Spanish fam­ily.

According to the International Olive Council, Spain con­sumed 587,300 tons of olive oil in the 2021/22 crop year, which makes the coun­try the largest olive oil con­sumer in the world.

Given the rel­e­vance of olive oil in the Spanish house­hold and its spik­ing prices, Luis Planas, the min­is­ter of agri­cul­ture, fish­eries and food, believes mea­sures must be taken to ensure olive oil does not become too costly for the aver­age Spanish fam­ily.

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