Spanish agriculture ministry considers lowering VAT on organic products

by Lorraine Williamson
possible VAT reduction on organic products

The Spanish Ministry of Agriculture is considering lowering VAT on organic products. Consumer organisation OCU points out that organic products cost on average 216% more than their traditional private label equivalents.

The aim of the possible VAT reduction is to encourage consumers to buy more organic products, ministry sources have confirmed to the Spanish newspaper laSexta. In 2020, the global market for organic products experienced the largest growth in recent years. The turnover reached €120 billion. Although the market continues to develop in Spain too and already stands at €2.53 billion, ‘more efforts’ are needed to boost the sector. 

Production and consumption are far apart in Spain  

Spain leads the European Union in organic production, with almost two and a half million hectares of land available. This figure corresponds to 10% of the total so-called ‘cultivated’ area. In terms of consumption, Spain remains below 3%, even though there are more and more specialised shops selling organic products. The consumer profile is varied. There are consumers who choose organic mainly for sustainability and environmental reasons and there are also many people with more purchasing power who choose organic.  

VAT reduction helps producers 

 For a number of farmers, this measure would be beneficial. Marcos, for instance, has been growing organic vegetables in Seville for more than 20 years. The taste is affected by the fact that a product harvested today will be in the shops tomorrow,’ he explains. He uses no chemicals, only natural ones. Furthermore, he doesn’t even use pesticides to control pests and remove weeds. He makes the following comparison: ‘A chemical treatment can cost between €100 and €300 per hectare, while the cost of manually removing weeds can be more than €5,000 euros per hectare’. Respect for the land implies 30% more labour. ‘Much more is done manually and ultimately we have to pass this on in the price of the product,’ he adds.  

A sharp reduction in VAT would help organic producers lower their prices. Alvaro Barrera, president of the Spanish professional association for organic cultivation Ecovalia, points out the benefits. ‘A reduction in VAT means promoting products that cause less disease to people and plants, restoring the soil and not mortgaging land’. 

 Related post: Organic products more expensive

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