Intense pressure from farmers, distributors, and consumers followed a price surge in olive oil that began in 2022. The drop in consumption reached 23.8 percent in volume between 2022 and 2023. In response, the government reclassified olive oil to sit alongside staple foods such as bread, milk, fruit, and fresh vegetables. When the new VAT policy takes effect in the shopping basket, as outlined in the decree that lowered the tax, olive oil will carry a super-reduced rate of 2 percent, while seed oils will be taxed at 7.5 percent, nearly four times higher.
olive oil faces an uneven playing field when viewed against other cooking oils; in the United States and Canada, buyers often compare pantry staples by price and reliability. As a result, North American shoppers may see similar dynamics where tax treatment nudges demand, but the impact depends on local policies and consumer preferences in each market.
But if the aim, as the government and many farming and consumer organizations applauded, was to shield and boost olive oil consumption, some experts say this move may not be the most effective instrument. Seed oils, which are more affordable for households with tighter budgets, will carry a 7.5 percent VAT while olive oil remains at 2 percent, a contrast noted by analysts. A UB economics professor questions the logic of the measure and asks why a similar reduction wasn’t extended to other oils, like sunflower oil.
In concrete terms, the sunflower oil category expanded its share of the market by about 13 percent between March 2023 and the same month this year, according to the Ministry of Agriculture and Food. Analysts emphasize the importance of the oil’s reach, noting a 14 percent rise in household penetration, moving from roughly 27.5 percent to 31.4 percent of homes purchasing sunflower oil for domestic use.
The idea behind the policy was to give olive oil a stronger foothold in the domestic market, especially given Spain’s role as a major producer. Yet experts warn that the effect will be tempered by the fact that seed oils remain cheaper, which could dilute the intended boost. Since the rebate began, olive oil prices for buyers have climbed about 37.2 percent, even though there have been declines since last April (roughly 12.7 percent). Seed oils, which have retained a 5 percent VAT since January 1, 2023, have redirected prices and fallen about 38.5 percent since that date, creating a contrasting price dynamic across oils.
The takeaway is that removing a tax like VAT did not follow a redistributive logic. Wealthier households, which tend to consume more, reduced expenses more than lower-income families because they simply spend more. In the family consumption survey, olive oil purchases are skewed toward households with higher purchasing power, meaning the tax exemption benefited those with greater means. A more direct redistribution, such as targeted transfers to vulnerable households, would likely have been more effective and cost-efficient from a budgetary standpoint, according to EsadeEcPol economists.
[–>
Producers, on the other hand, welcome the move and are preparing for a renewed campaign with brighter prospects than last year. The harvest outlook is favorable, especially in Andalusia where timely spring rains helped secure the crop. That rain pattern should also help producers negotiate steadier prices at the farm gate, easing some pressure on margins as the season unfolds.