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Spain to eliminate tax on olive oil to ease price jump / Photo: JORGE GUERRERO - AFP/File
NYSE - LSE
Spain to eliminate tax on olive oil to ease price jump
Spain's leftist government said Friday it will remove the value-added tax on olive oil, a staple of Spanish cuisine which has soared in price due to a severe drought that has caused a sharp drop in the country's olive harvest.
Socialist Prime Minister Pedro Sanchez's government will from July "permanently" include olive oil in the list of "basic necessities" which are exempt from the tax, the budget ministry said in a statement.
This is "wonderful news for all Spaniards," government spokeswoman Pilar Alegria said during an interview with private television station Antena 3.
The measure which will be approved at a weekly cabinet meeting on Tuesday will "ease the burden on Spaniards' wallets" as well as "support the olive sector and stimulate consumption of a product that is so important for our country," she added.
Supermarkets have reported a spike in thefts of olive oil bottles since their price has soared, prompting some retailers to fit them with security tags normally seen on pricey items like alcohol while sales of cheaper alternatives such as sunflower seed oil have increased.
Basic necessities such as bread, fruits and vegetables usually carry a reduced VAT rate of 4.0 percent but during times of high inflation as is currently the case the rate is reduced to zero.
The government already lowered the VAT rate slapped on olive oil to 5.0 percent from 10 percent in 2023 to help fight rising food prices but that has not stopped its price from continuing to rise.
Spain, which supplies almost half of the world's olive oil, is along with Greece the globe's leading consumer of the product, with each person consuming nearly 14 litres per year, according to the International Olive Oil Council.
The cost of olive oil in Spain in May was 63 percent higher than during the same month last year, and three times more expensive than in January 2021.
The sharp rise is due to a drop in production in Spain during the 2022-23 and 2023-24 seasons as a result of a series of extreme heat waves and a lack of rainfall in the country, especially in the southern region of Andalusia, the main olive producing region.
During the 2022-23 season, Spain produced 660,000 tonnes of olives, down from 1.48 million tonnes during the 2021-22 season. The agriculture ministry predicts production will not exceed 850,000 tonnes in 2023-24.
(O.Garcia--TAG)
