Record VAT receipts helped shrink the deficit in the public finances last month, according to the latest figures from the Department of Finance.

An Exchequer deficit of €5.746 billion was recorded to the end of July.

This is an improvement of €1.7 billion compared to a deficit of €7.4 billion recorded over the same period last year.

Taxes last month were €1.4 billion or 33% higher than in July 2020 and 12.4% ahead of profile.

Cumulatively, taxes to the end of July are just over €4 billion or 13% ahead of where they were at this point last year and 3.4% ahead of profile.

Spending, however, is 2.9% higher than the same period last year but is 3.7% behind profile.

Income tax receipts were up 5.4% on profile at just over €2 billion.

Almost €2.5 billion was collected in VAT in July making it ‘among the highest monthly receipts on record’ according to a statement from the Department.

Receipts were €354 million or 16.7% higher than expected due to what’s described as a ‘strong recovery in consumer spending.’

In fact, VAT receipts last month were 7.5% higher than in July 2019, before the pandemic.

“Tax receipts in July, particularly VAT returns, reflect the opening-up of our economy and are a really positive signal as we emerge from the pandemic,” Minister for Finance Paschal Donohoe said of the latest returns.

“As noted in the Summer Economic Statement a few weeks ago, it will be essential that we strike the right balance between maintaining temporary supports to businesses and households going forward, while bringing the public finances back to a sustainable position in the coming years,” he added.

On the spending side, total spending for the seven months to the end of July amounted to just over €47.1 billion, which was up almost 3% on the same period in 2020.

However, it was €1.8 billion, or 3.7%, below what had been projected by the department.

The under-spend is said to have resulted from a number of factors including the closure of construction sites earlier in the year.

“Within the current expenditure amount of €44.2 billion, €19 billion is in the Department of Social Protection with spending in the Department of Health at €11.2 billion,” Minister for Public Expenditure and Reform, Michael McGrath said.

“Together, these Departments account for over two thirds of current spending so far this year.”

Peter Vale, Tax Partner at Grant Thornton Ireland, described the VAT figures as startling, noting that spending was now firmly ahead of pre-Covid levels.

“It’s clear that the strong VAT figures earlier in the summer did not reflect a temporary post-Covid spending splurge. Based on the latest figures, consumers are continuing to spend,” he said.

“The fact that many of us will holiday in Ireland this summer should see the strong spending figures sustained for the remainder of the summer.”