Spain’s left-wing government said Friday it will abolish the value-added tax on olive oil, a staple of Spanish cuisine that has risen in price due to a severe drought that has caused a sharp decline in the country’s olive crop.
Socialist Prime Minister Pedro Sanchez’s government will “permanently” include olive oil in the list of “basic needs” exempt from the tax from July, the Budget Ministry said in a statement.
This is “great news for all Spaniards,” government spokeswoman Pilar Alegria said during an interview with private television channel Antena 3.
The measure, which will be approved at a weekly cabinet meeting on Tuesday, will “ease the burden on the wallets of Spaniards” and “support the olive sector and stimulate the consumption of a product so important for our country,” she added.
Supermarkets have reported a spike in thefts of olive oil bottles since their price rose, prompting some retailers to fit them with security tags normally found on expensive items such as alcohol, while sales of cheaper alternatives such as sunflower oil have increased.
Basic necessities such as bread, fruit and vegetables usually have a reduced VAT rate of 4.0 percent, but in times of high inflation, as is currently the case, the VAT rate is reduced to zero.
The government has already reduced the VAT rate on olive oil from 10 percent in 2023 to 5.0 percent to help combat rising food prices, but that hasn’t stopped the price from continuing to rise.
Spain, which supplies almost half of the world’s olive oil, is, along with Greece, the world’s largest consumer of the product, with each person consuming almost 14 liters a year, according to the International Olive Oil Council.
The cost of olive oil in Spain was 63 percent higher in May than in the same month last year, and three times more expensive than in January 2021.
The sharp increase is due to a drop in production in Spain during the 2022-23 and 2023-24 seasons due to a series of extreme heatwaves and a lack of rainfall in the country, especially in the southern region of Andalusia. main olive producing region.
During the 2022-2023 season, Spain produced 660,000 tons of olives, compared to 1.48 million tons during the 2021-2022 season. The Ministry of Agriculture predicts that production will not exceed 850,000 tonnes in 2023-2024.
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