The debate over VAT relief on olive oil has sparked a multi-month process before citizens begin to notice lower prices on supermarket shelves. The tax cut, a compromise reached between the government and the Junts parliamentary group this week, will be implemented through adjustments to the anti-crisis measures decree. At first, the extension will apply only through 2023, as confirmed by the Minister of Agriculture and Food, Luis Planas, during discussions with the distribution sector. The act will be carried out through an emergency procedure, leaving Parliament the task of rapid approval. The timeline hinges on the Senate’s pace, where the opposition holds a strong position, and the overall speed of the legislative process. The government aims to push the reform through quickly so that retailers can reflect the lower rate in prices as soon as possible.
Planas voiced optimism that the epidemic would be controlled and that the VAT reduction would help ease the burden of olive oil costs for consumers. Industry groups praised the measure, noting that olive oil has long been sensitive to inflation pressures in the food sector. The government had already flagged this product as a priority in the initial anti-crisis measures a year earlier, recognizing that it had been one of the most affected items in recent inflation. The VAT rate for olive oil was cut from 10% to 5% as part of that early response, a policy now being extended to further alleviate price pressures.
Extra virgin olive oil in supermarkets up 70% year over year
During the meeting with leaders of the food distribution sector, including Anged and Asedas, and alongside the Agriculture President, officials emphasized that the oil sector represents a distinctive case of price sensitivity. The reduced VAT is framed as a timely intervention justified by the need to protect family budgets and maintain access to essential groceries. This perspective is supported by consumer advocates who view the measure as a relief for many households facing rising living costs. The government stresses that this is not a blanket tax cut, but a targeted adjustment for basic foods, oils, and pasta—products deemed essential to daily life. The aim is to maintain a broad reach while avoiding distortions in other product categories. (Attribution: Government communications team)
Planas did not comment on additional adjustments to the list of items eligible for VAT relief, noting that the current package prioritizes staple foods, oils, and pasta. The minister reaffirmed the policy direction: the government intends to support the most frequently purchased items, thereby helping a majority of citizens while maintaining fiscal discipline. This stance aligns with the broader objective of shielding households from inflationary shocks caused by food prices. (Attribution: Ministry of Agriculture briefing)
bad harvest
Even so, the minister tempered expectations about the price impact. While the VAT cut lowers the consumer price of olive oil, the product’s cost dynamics are driven by multiple factors beyond tax policy. Drought, climate change, and rising temperatures have been major contributors to price volatility in recent years. The latest harvest was about 55% below the long-term average, and this year’s crop is expected to rebound only modestly, remaining below average. That context means the inflationary effect of olive oil remains significant, regardless of the tax relief. (Attribution: Agricultural statistics team)
The government emphasizes that the price decrease will not erase all inflationary pressures, but it will contribute to easing the burden on households and retailers alike. The broader message is that tax policy is part of a wider toolkit aimed at keeping essential food costs in check while addressing long-term agricultural sustainability. (Attribution: Economic policy brief)
distribution reaction
Aurelio del Pino, president of the Association of Spanish Supermarket Chains (ACES), noted that distribution channels hope to extend discounts on more food items, while acknowledging that any reduction in VAT is welcome. Matilde García, president of the National Association of Large Distribution Companies (Anged), expressed a preference for policy stability and cautioned against last-minute policy shifts. Still, she welcomed the VAT cut on olive oil and underscored the importance of predictable fiscal measures that support consumer affordability. (Attribution: Industry associations statements)