Vat surge helps lifts tax haul to €5.7bn in July and bolsters recovery hopes             

At €2.47bn, Vat receipts took in €354m more than anticipated in July

Tax haul will boost Finance Minister Paschal Donohoe's budget preparations.

The Government took in a haul of €5.7bn in tax revenues in July, driven by a surge in Vat as most of the hospitality industry opened up, a result that is likely to bolster expectations for an exceptional economic rebound this year. 

The tax haul will boost Finance Minister Paschal Donohoe and Expenditure Minister Michael McGrath in their early preparations ahead of the budget in October, as long as the Delta variant does not lead to new restrictions and the derailing of the recovery.

Thanks to Vat as well as income tax receipts, the €5.7bn the exchequer collected in receipts in the month was much more than anticipated.

It was also €1.4bn ahead of the revenues collected in the same month last year, well before the roll-out of vaccines had got under way.

At €2.47bn, Vat receipts — one of the Government’s ‘big four’ tax sources — took in €354m more than anticipated in July, as some of the €12bn-plus in savings built up during the crisis started to be spent.    

“The robust [Vat] outturn is consistent with recent retail sales data that showed a strong recovery in consumer spending in the second quarter as public health restrictions were eased,” the Department of Finance said.

At €2.1bn, income tax revenues — also among the ‘big four’ and which have held up surprisingly well thanks to the billions of euros pumped into the economy in the form of pandemic unemployment and wage-support schemes — again outperformed.

Since the start of the year, the exchequer has now taken in a better-than-anticipated €35.2bn in tax revenues, and over €4bn more than was collected over the same seven months last year.

On the spending side over the same period, the Government’s total voted spending is now running at €47.2bn, up by €1.3bn than it spent over the first seven months in 2020.

That meant that the exchequer had a deficit of €10.6bn in the 12 months to the end of July, the department said.

In its summer economic statement, the department had forecast last month an exchequer deficit this year of €18.8bn, and a general government deficit of €20.3bn.

However, the forecasts also included a projection that GDP will grow by 8.8%, and many economists predict the Irish economy will grow by a much faster rate.