He VAT is reapplied to staple foodsincluding the olive oilof this Tuesdayin principle to 2% between October and Decemberthen move on to very low rate of 4%as it was before temporary removal of this tax in January 2023. Thus, the olive oil will be part of the list of foods with a Super reduced VAT (with a 4% tax) permanently, from 2025, because it is considered an “essential product”.
In January 2023, the Government took the decision to abolish VAT to the food group which already benefited from the reduced rate of 4% to cope with the economic consequences of the war in Ukraineparticularly to contain inflation and help the most vulnerable consumers. He also lowered VAT from 10% to 5% on oils and pastes.
Oil is already a commodity
From tomorrow olive oil will have a VAT of 2% until the end of the year; while the oils seeds and pastes will now have 7.5% of VAT between October and December. The food group with super reduced type It is composed of:
- common bread
- Bread flours
- animal milk
- Cheeses
- Eggs
- Fruit
- Vegetables
- Vegetables
- Legumes
- Cereals
From the first VAT reduction In January 2023, the The government extended said measure is temporary, while waiting for the price of basic foods to fall normalize.
Last June, the Council of Ministers extended the measure to the rest of the year and the reinforced in the case of olive oilconsidered essential for healthy household diets and essential from an economic point of view. According to data from the Public Treasury, between January and July, the reduction in VAT on food products led to a drop in revenue of 442 million euros.
The government has insisted that the gradual return to normal VAT rates responds to the European Commission’s mandate to gradually ease the extraordinary measures that different countries have adopted in recent years against inflation. According to the Consumer Price Index (CPI) of the National Institute of Statistics (INE), the prices of food products and non-alcoholic drinks they increased by 2.5% in August last compared to the same month of 2023, six tenths less compared to the annual rate of July and the lowest figure since October 2021.
Generally speaking, inflation was 2.3% in August, five tenths lower than that recorded in June, reflecting a tendency towards moderation. The food industry and distribution sectors have proven themselves in favor of the extension of VAT of food during these months, even if it was not applied to other products in the basket such as meat and fish.
According to calculations by the Association of Manufacturers and Distributors (Aecoc) based on a PwC report, the food inflation will increase by about one point with goodbye to reduced VAT.
What will happen to the price of olive oil
In the countryside, there is talk of a good harvest and a future drop in the price of olive oil. However, they assure that this drop will not arrive for a few months, given that the situation on the ground takes a long time to reach the supermarkets. Currently, the price of white label olive oil is hovering around 8.90 for each literalmost one euro less than what we paid at the start of the year. However, it remains more expensive than last September. The end of the VAT reduction its price would increase by 1.78 per liter. And what would happen to the rest of the products? According to the average price forecasts from the Statista portalthe amounts without VAT reduction would be as follows:
- Common bread (2.63 euros per kilo): 3.15 euros per kilo
- Milk of animal origin (0.97 euros per liter): 1.16 euros per liter
- Cheeses (9.5 euros): 11.4 euros
