The Abossey Okai Spare Parts Dealers Association has warned of a possible one week strike if the government fails to urgently review the newly implemented Value Added Tax (VAT) regime under the Value Added Tax Act, 2025 (Act 1151).
In a press statement dated Saturday, February 8, 2026, and signed by its Head of Communications, Takyi Addo, the Association said the current 20 percent VAT rate is hurting pricing, competitiveness and compliance within the spare parts sector. The effective VAT rate on spare parts has risen from approximately 4 percent under the previous tax arrangement to 20 percent under the new regime.
The Association explained that an item previously sold for GH¢500 attracted GH¢20 in VAT under the old system, bringing the total price to GH¢520. Under the new regime, the same item now attracts GH¢100 in tax, pushing the final price to GH¢600. This represents an additional GH¢80 burden on consumers for the same product at a time when many Ghanaians are struggling with the high cost of living.
According to the dealers, VAT registered businesses have recorded an average decline in sales of approximately 15 percent since the implementation of the new tax regime. The sharp drop has negatively affected livelihoods, reduced compliance, and forced many customers to shift purchases to informal and non compliant sellers, the statement noted.
The group warned that the trend ultimately undermines government revenue mobilisation and threatens the sustainability of legitimate enterprises within the Abossey Okai trading enclave and beyond. The dealers have called on the Ghana Revenue Authority (GRA) to urgently withdraw the 20 percent VAT increase and open discussions with stakeholders to develop a more practical and business friendly taxation framework.
As an alternative, the Association is proposing a simplified VAT scheme tailored to the spare parts sector. It believes such a system could increase revenue collection by at least 10 percent through improved compliance and formalisation, reduce tax evasion, broaden the tax net, and restore fair competition within the market.
The dealers are advocating a VAT rate of between 5 and 8 percent, which they argue would align Ghana with regional competitors and enhance the competitiveness of local spare parts businesses. They also proposed the introduction of a sector specific simplified VAT scheme with a flat rate of approximately 3 percent, applied uniformly regardless of whether goods are imported directly or sourced locally.
While expressing support for government efforts to broaden the tax base and strengthen revenue mobilisation, the Association argued that the 20 percent rate is too high for the spare parts trade, which typically operates on thin profit margins. The dealers believe that a reduced rate would restore fairness, encourage voluntary compliance, protect jobs, and ultimately increase government revenue by reducing tax leakages.
The Association stated it remains open to dialogue with authorities but cautioned that failure to review the VAT structure could trigger a one week industrial action. The proposed strike would involve the closure of all spare parts shops in the Abossey Okai trading area, potentially disrupting vehicle repairs and maintenance services across the Greater Accra Region.
The Value Added Tax Act, 2025 (Act 1151) was passed by Parliament as part of the government’s revenue mobilisation measures aimed at increasing domestic resource mobilisation and reducing dependence on external borrowing. The legislation introduced several changes to the VAT regime, including adjustments to rates and compliance mechanisms.
Abossey Okai, located in the Accra Metropolitan Area, is Ghana’s largest automotive spare parts market, serving mechanics, vehicle owners, and businesses across the country. The market employs thousands of traders and supports a significant portion of the automotive repair industry in Ghana.
The GRA has not yet issued an official response to the Association’s statement or the threat of industrial action. The revenue authority is mandated under law to administer and enforce tax legislation, including VAT collection and compliance monitoring across all sectors of the economy.
This is not the first time spare parts dealers at Abossey Okai have clashed with tax authorities. In October 2023, the Association embarked on a sit down strike against the GRA’s Compliance and Manual Policing Exercise, which they described as intimidating and disrespectful. That strike was suspended after the GRA withdrew its personnel from shops following negotiations.
The current dispute comes amid broader government efforts to increase tax revenue and improve compliance across the informal sector. The Ministry of Finance has set ambitious revenue targets for 2026 as part of Ghana’s ongoing International Monetary Fund (IMF) supported economic recovery programme.
Industry analysts have noted that the automotive spare parts sector is particularly sensitive to tax changes due to intense competition from both formal and informal traders, as well as competition from neighbouring countries where tax regimes may be more favorable.
The Association’s leadership has called on the government to recognize the unique characteristics of the spare parts trade and adopt a taxation approach that balances revenue objectives with the realities of the business environment. They emphasized that punitive tax rates could drive more businesses into the informal sector, ultimately reducing government revenue rather than increasing it.
