Significant impact of the VAT increase

The increase in Value Added Tax (VAT) can have a significant impact on the consumption of Extra Virgin Olive Oil (EVOO), a basic product in the Mediterranean diet and highly valued for its health benefits. The possible effects of an increase in VAT on EVOO consumption are analyzed below:

1. Demand Reduction

• Price Sensitivity: EVOO is a product with a relatively elastic demand, especially in markets where consumers have cheaper alternatives, such as other types of oil (sunflower, refined olive, etc.). An increase in VAT would increase the final price of the product, which could lead to a decrease in its consumption.
• Substitution with Cheaper Alternatives: Consumers could opt for cheaper oils, which would negatively affect EVOO sales.

2. Impact on Producers

• Decrease in Income: EVOO producers could see their income reduced due to the drop in sales. This could be especially problematic for small producers and cooperatives that rely heavily on this product.
• Pressure on Prices: To maintain sales, producers could be forced to reduce their profit margins, which would affect the sustainability of the sector.

3. Effects on Competitiveness

• International Market: An increase in VAT could make EVOO produced in one country less competitive in the international market, especially if other countries maintain lower taxes or subsidies for their producers.
• Exports: If domestic consumption decreases, producers could be forced to rely more on exports, which could be risky due to the volatility of international markets.

4. Impact on Public Health

• Changes in Dietary Habits: EVOO is a key component of the Mediterranean diet, associated with numerous health benefits. An increase in its price could lead consumers to opt for less healthy alternatives, which could have negative implications for public health.

5. Tax Considerations

• Tax Revenue: Although the increase in VAT could generate greater tax revenue in the short term, in the long term, the reduction in consumption could offset this effect, especially if the sector is severely affected.

Conclusion

An increase in VAT on EVOO could have negative effects for both consumers and producers, reducing the consumption of a healthy product and affecting the economic viability of the sector. Therefore, any decision in this regard should carefully consider the balance between the need for tax revenue and the impact on the economy and public health.