The temporary value-added tax (VAT) cut recently 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 Spain’s rising price of olive oil.
Starting January 1st and lasting until June 30th, the VAT of all cooking oils was reduced from ten to five 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.
Olive oil producers have observed that rising costs, such as energy, fertilizers and logistics undercut the VAT reduction. Such costs tend to raise prices throughout the whole food production chain.See Also:Olive Oil Business News
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 as it happened with 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 Córdoba and general director in DCOOP, told ABC.
While applauding “any measure that helps curtail prices,” Sánchez de Puerta noted that the government’s VAT cut is unlikely to significantly impact sales, as it does not curtail costs sustained by olive oil producers.
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 event.”
Barato also remarked that the latest Ministry of Agriculture, Fisheries and Food estimates show that olive oil production in Spain will fall short of 770 thousand tons this year. That places the country’s output at about 50 percent of last season’s yield.
Barato also noted that a VAT reduced to zero 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.
Given the relevance of olive oil in the Spanish household and its spiking prices, the Minister of Agriculture, Fisheries and Food, Luis Planas, believes measures must be taken to ensure olive oil does not become too pricey for the average Spanish family.