Abossey Okai Spare Parts Dealers threaten one-week strike over VAT increase

The Abossey Okai Spare Parts Dealers Association has raised concerns over the newly implemented Value Added Tax (VAT) regime under the Value Added Tax Act, 2025 (Act 1151), warning that the policy is distorting competition within the spare parts trade and could trigger a one-week strike if not urgently reviewed.

In a press statement issued on February 8, 2026, and signed by its Head of Communications, Takyi Addo, the Association said the current VAT structure has increased the effective tax burden on spare parts dealers from about four percent to twenty percent, significantly affecting pricing, fairness and voluntary tax compliance in the sector.

According to the Association, the shift in VAT has altered market pricing.

According to the association, under the previous arrangement, “an item selling at GH¢500 attracted about GH¢20 in VAT, bringing the final price to GH¢520. Under the current regime, the same item attracts GH¢100 in VAT, pushing the price to GH¢600.”

Abossey Okai spare parts dealers demand VAT review

“This represents an additional GH¢80 burden on consumers for the same product,” the Association noted.

A key concern highlighted is the unequal impact of the VAT system on dealers who source spare parts locally rather than importing directly.

The Association explained that two dealers can buy identical goods from the same importer at the same cost price, yet face different tax obligations.

“Dealers with annual turnovers above GH¢750,000 are required to register for VAT and charge 20 percent at the point of sale, while those below the threshold are exempt.”

This, the Association said, creates a structural imbalance, as VAT-registered dealers who source locally cannot claim input VAT, yet must still charge output VAT, forcing them to sell at higher prices than non-registered competitors.

“This situation penalizes growth, efficiency, and compliance, while unintentionally rewarding fragmentation and informality,” the statement emphasised.

The Association warned that the current VAT structure is encouraging customers to patronize non-VAT-charging sellers, incentivizing businesses to deliberately remain below the VAT threshold, discouraging expansion and formalization and ultimately reducing overall tax compliance within the spare parts sector.

Although import VAT is creditable under the new law, the Association noted that this relief does not extend to dealers who purchase goods locally, even though they operate within the same supply chain.

While reaffirming its support for government’s efforts to broaden the tax base and strengthen domestic revenue mobilization, the Association described the 20 percent effective VAT rate as excessively high for the spare parts trade.

It proposed either a reduced VAT rate of between five and eight percent for spare parts dealers, or the introduction of a sector-specific simplified VAT scheme at a flat rate of about three percent, applied uniformly regardless of whether goods are imported directly or sourced locally.

According to the Association, such measures “would restore price competitiveness, promote fairness, protect compliant businesses, encourage voluntary compliance and ultimately improve net revenue collection by reducing tax leakage through informality.”

In a separate statement, the Abbossey Okai Spare Parts Dealers Association also reaffirmed its commitment to renewed collaboration with the Ghana Union of Traders’ Associations (GUTA) following a meeting held on January 9, 2026.

The Association recalled that it had temporarily disengaged from some GUTA activities in December 2025 over communication gaps and concerns regarding recognition during the inauguration of GUTA’s new president. However, subsequent constructive dialogue between the leadership of both organizations has resolved the outstanding issues.

The Association expressed appreciation to the Councils of Elders of both groups for their role in fostering reconciliation and consensus.

Chairman of the Association, Henry Okyere Jnr, congratulated the newly elected GUTA President and called for unity and cooperation among all trader groups.

“The challenges facing traders today require cooperation rather than division. We must work together as one team to protect our businesses, stabilize markets and contribute meaningfully to national development.”

AM

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