The Impact of Financial Literacy on Tax Compliance in Indonesia with a Focus on the 12% Tax Rate
Abstract
This paper examines the impact of financial literacy on tax compliance in Indonesia, particularly focusing on the upcoming increase in Value Added Tax (VAT) to 12% scheduled for 2024. As a developing nation with as substantial population, Indonesia faces challenges in increasing state revenue through taxation. Financial literacy, defined as the ability to understand and effectively manage financial concepts, plays a vital role in enhancing tax compliance among the populace. The study highlights that individuals with higher financial literacy are more likely to comprehend the importance of paying taxes, understand their rights and obligations as taxpayers, and accurately calculate their tax liabilities. Conversely, those with lower financial literacy levels often struggle to grasp tax regulations and may be less compliant. The findings underscore that boosting financial literacy among the Indonesian population could lead to improved tax compliance, which is essential for increasing government revenue and promoting economic growth. Furthermore, this research emphasizes the need for educational programs aimed at enhancing financial literacy, thus fostering a culture of compliance. A qualitative approach was adopted, involving literature reviews and thematic analyses to explore taxpayer perceptions, attitudes, and behaviors regarding the 12% VAT increase. Ultimately, the success of tax policy initiatives in Indonesia is contingent upon the level of financial literacy within the community.
References
Adesina, F., Carnaghan, C. , & Smith, J. (2023). The Relationship Between Financial Education in Young Adults and Financial Literacy: A Review of the Literature in Canada and the United States. Accounting Perspectives.
Agusti, R. R. , & Rahman, A. F. (2023). Determinants of tax attitude in small and medium enterprises: Evidence from Indonesia. Cogent Business & Management, 10(1).
Asimakopoulos, S. , Lorusso, M. , & Pieroni, L. (2021). Can public spending boost private consumption? Canadian Journal of Economics/Revue Canadienne d’économique, 54(3).
Astuti, P. H. , & Trinugroho, I. (2016). FINANCIAL LITERACY AND ENGAGEMENT IN BANKING. Journal of Economics & Economic Education Research, 17(1).
BANSAL, D. (2022). Financial Literacy a Key to Financial Inclusion: A Study conducted for Tier I and Tier II Cities. Finance India, 36(2).
Bansal, S. , & Singh, G. (2023). Multiple Linear Regression Based Analysis of Weather Data: Assumptions and Limitation. In International Conference on Advanced Communication and Intelligent Systems , 221–238.
Booth, A. (1983). The “Keynesian Revolution” in Economic Policy‐making . 36(1), 103–123.
Boubaker, S. , Dang, V. A. , & Sassi, S. (2022). Competitive pressure and firm investment efficiency: Evidence from corporate employment decisions. European Financial Management, 28(1), 113–161.
Cechovsky, N. (2018). The importance of tax knowledge for tax compliance: A study on the tax literacy of vocational business students. In European Conference on Educational Research (ECER), Vocational Education and Training Network (VETNET).
Chardon, T. , Freudenberg, & Brimble, M. (2016). Are Australians under or over confident when it comes to tax literacy, and why does it matter.
Cwik, T. , & Wieland, V. (2011). Keynesian government spending multipliers and spillovers in the euro area. Economic Policy, 26(67).
Damayanti, S. M. , Aditya, K. , & Rahadi, R. A. (2023). Financial capability and financial information’s effect on the financial literacy index among Indonesian workers. International Journal of Economic Policy in Emerging Economies, 18, 356–362.
Dewi Anggadini, Bramasto, A., & Fahrana, E. (2022). Determination of individual taxpayer compliance in Indonesia: A case study. . Journal of Eastern European and Central Asian Research, 9(1).
Farrar, J. , Rennie, M. , & Thorne, L. (2021). Fairness, legitimacy, and tax compliance.
Finke, M. S. , & Huston, S. J. (2014). Financial literacy and education. Investor behavior: The psychology of financial planning and investing. 63–82.
Gilligan, G. , & Richardson, G. (2005). Perceptions of tax fairness and tax compliance in Australia and Hong Kong‐a preliminary study. Journal of Financial Crime, 12(4).
Gonidakis, F. K. , Asonitou, S. , & Kottara, C. (2023). The Contribution of Education to the Creation of Tax Awareness and Compliance. In The International Conference on Strategic Innovative Marketing and Tourism , 9(1), 571–583.
Guðjónsson, S. , Jonsdottir, S. M., & Minelgaitė, I. (2022). Knowing more than own mother, yet not enough: secondary school students’ experience of financial literacy education. Pedagogika/Pedagogy, 145(1).
Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 42(2).
Inasius, F. (2019). Factors influencing SME tax compliance: Evidence from Indonesia. International Journal of Public Administration, 42(5).
Kirana, M. Y. , & Havidz, S. A. H. (2020). Financial literacy and mobile payment usage as financial inclusion determinants. International Conference on Information Management and Technology.
Kogler, C. , Muehlbacher, S. , & Kirchler, E. (2015). Testing the “slippery slope framework” among self-employed taxpayers. Economics of Governance, 16, 125–142.
Laurin, M. , Messacar, D., & Michaud, P. C. (2023). Financial literacy and the timing of tax-preferred savings account withdrawals. Journal of Accounting and Public Policy, 42(2).
Lin, B. , & Jia, Z. (2019). Tax rate, government revenue and economic performance: A perspective of Laffer curve. China Economic Review.
Mahadevan, R., Amir, H., & Nugroho, A. (2017). How pro-poor and income equitable are tourism taxation policies in a developing country? Evidence from a computable general equilibrium model. Journal of Travel Research, 2017, 334–346.
Mateus, C. , & Mateus, I. B. (2021). Does a VAT rise harm the tourism industry? Portuguese evidence. Tourism Management, 83.
Moučková, M. , & Vítek, L. (2018). TAX LITERACY. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 66(2).
Muehlbacher, S., & Kirchler, E. (2008). Effort and aspiration levels in tax compliance decisions.
Murarka, L. , & Oates, K. K. (2020). Financial literacy in millennials. Journal of Humanities and Social Sciences Studies, , 2(6), 41–54.
Neuberger, L. , Carroll, D. A. , & Bastante, S. (2022). Taking financial literacy downtown: Leveraging community partnerships to increase communication of essential financial information in an urban area. Education and Urban Society.
Nichita, A. , Batrancea, L. , Marcel Pop, C., & Batrancea, I. ,. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics.
Nichita, A., Batrancea, L. , & Marcel Pop, C. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics, 57(5).
Nilsson, J. E. (2018). New Keynesian policy The revival of each policy maker’s dream.
Patil, A. , Niranjan, L. R., & Patavardhan, R. ,. (2024). An In-Depth Investigation Into Financial Literacy Levels in Indian Households. In Contemporary Research and Practices for Promoting Financial Literacy and Sustainability , 113–146.
Safitra, D. A., & Djamaluddin, S. (2019). The effect of the supervision activities of tax authorities on VAT compliance in Indonesia. Nova Science Publishers, Inc..
Sahoo, A. P., Patnaik, A. , Patnaik, B., & Satpathy. (2024). The Relationship between Financial Literacy and Investment Strategies among Gig Workers. In Synergy of AI and Fintech in the Digital Gig Economy , 199–216.
Santoso, A. B. , Trinugroho, I. , Nugroho, L. I., Saputro, N. , & Purnama, M. Y. I. (2016). Determinants of financial literacy and financial inclusion disparity within a region: Evidence from Indonesia. Advanced Science Letters, 1622–1624.
Semenova, G. (2020). Impact of vat raise on Russian economy. In E3S Web of Conferences (Vol. 210, p. 13028).
Shamim, A. , & Agarwala, T. (2024). Factors that Promote Financial Literacy: Tracing through a Systematic Literature Review Approach. SCMS Journal of Indian Management.
Sharma, S. (2022). Enablers to financial literacy: A DEMATEL approach. Procedia Computer Science, 520–527.
Sharma, S., Durand, R. M., & Gur-Arie, O. (1981). Identification and analysis of moderator variables. Journal of Marketing Research, 18(3), 291–300.
Siwinska, J. , & Bujak, P. (2006). The short-run macroeconomic effects of discretionary fiscal policy changes. In The Eastern Enlargement of the Eurozone .
Skott, & Ryoo, S. (2017). Functional finance and intergenerational distribution in neoclassical and Keynesian OLG models. Review of Keynesian Economics, 5(1).
Sugiyono. (2012). Metode Penelitian Kuantitatif, Kualitatif, dan R&D. Alfabeta.
Sugiyono. (2018). Metode Penelitian Kombinasi (Mixed Methods). CV Alfabeta.
Tambunan, M. R. U. D. (2021). RETHINKING TAX TREATMENT DURING THE COVID-19 PANDEMIC: A NOTE ON INDONESIA’S OMNIBUS LAW JOB CREATION TAXATION CLUSTER. In Journal of the Australasian Tax Teachers Association (Vol. 16, Issue 1). https://setkab.go.id/daftar-tautan-49-aturan-pelaksana-uu-cipta-kerja/
Tanzi, V. (2018). Rethinking keynesianism 10 years after the global crisis. Acta Oeconomica, 7–19.
Trawule, A. Y. , Gadzo, S. G. , & Kportorgbi, H. K. (2022). Tax education and fear-appealing messages: A grease or sand in the wheels of tax compliance?. . Cogent Business & Management, , 9(1).
Wanniski, J. (1978). Taxes, revenues, and the Laffer curve. The Public Interest.
Wibowo, B. P. , Larasati, M. , & Saad, R. A. J. (2025). Understanding tax compliance in indonesian smes: a structural equation modeling approach to tax literacy, knowledge, fairness, power, and trust. Ciencia y Tecnología-Serie de Conferencias.
Zaimovic, A., Torlakovic, A., & Arnaut-Berilo, A. (2023). Mapping financial literacy: A systematic literature review of determinants and recent trends. 15(12).
Agusti, R. R. , & Rahman, A. F. (2023). Determinants of tax attitude in small and medium enterprises: Evidence from Indonesia. Cogent Business & Management, 10(1).
Asimakopoulos, S. , Lorusso, M. , & Pieroni, L. (2021). Can public spending boost private consumption? Canadian Journal of Economics/Revue Canadienne d’économique, 54(3).
Astuti, P. H. , & Trinugroho, I. (2016). FINANCIAL LITERACY AND ENGAGEMENT IN BANKING. Journal of Economics & Economic Education Research, 17(1).
BANSAL, D. (2022). Financial Literacy a Key to Financial Inclusion: A Study conducted for Tier I and Tier II Cities. Finance India, 36(2).
Bansal, S. , & Singh, G. (2023). Multiple Linear Regression Based Analysis of Weather Data: Assumptions and Limitation. In International Conference on Advanced Communication and Intelligent Systems , 221–238.
Booth, A. (1983). The “Keynesian Revolution” in Economic Policy‐making . 36(1), 103–123.
Boubaker, S. , Dang, V. A. , & Sassi, S. (2022). Competitive pressure and firm investment efficiency: Evidence from corporate employment decisions. European Financial Management, 28(1), 113–161.
Cechovsky, N. (2018). The importance of tax knowledge for tax compliance: A study on the tax literacy of vocational business students. In European Conference on Educational Research (ECER), Vocational Education and Training Network (VETNET).
Chardon, T. , Freudenberg, & Brimble, M. (2016). Are Australians under or over confident when it comes to tax literacy, and why does it matter.
Cwik, T. , & Wieland, V. (2011). Keynesian government spending multipliers and spillovers in the euro area. Economic Policy, 26(67).
Damayanti, S. M. , Aditya, K. , & Rahadi, R. A. (2023). Financial capability and financial information’s effect on the financial literacy index among Indonesian workers. International Journal of Economic Policy in Emerging Economies, 18, 356–362.
Dewi Anggadini, Bramasto, A., & Fahrana, E. (2022). Determination of individual taxpayer compliance in Indonesia: A case study. . Journal of Eastern European and Central Asian Research, 9(1).
Farrar, J. , Rennie, M. , & Thorne, L. (2021). Fairness, legitimacy, and tax compliance.
Finke, M. S. , & Huston, S. J. (2014). Financial literacy and education. Investor behavior: The psychology of financial planning and investing. 63–82.
Gilligan, G. , & Richardson, G. (2005). Perceptions of tax fairness and tax compliance in Australia and Hong Kong‐a preliminary study. Journal of Financial Crime, 12(4).
Gonidakis, F. K. , Asonitou, S. , & Kottara, C. (2023). The Contribution of Education to the Creation of Tax Awareness and Compliance. In The International Conference on Strategic Innovative Marketing and Tourism , 9(1), 571–583.
Guðjónsson, S. , Jonsdottir, S. M., & Minelgaitė, I. (2022). Knowing more than own mother, yet not enough: secondary school students’ experience of financial literacy education. Pedagogika/Pedagogy, 145(1).
Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 42(2).
Inasius, F. (2019). Factors influencing SME tax compliance: Evidence from Indonesia. International Journal of Public Administration, 42(5).
Kirana, M. Y. , & Havidz, S. A. H. (2020). Financial literacy and mobile payment usage as financial inclusion determinants. International Conference on Information Management and Technology.
Kogler, C. , Muehlbacher, S. , & Kirchler, E. (2015). Testing the “slippery slope framework” among self-employed taxpayers. Economics of Governance, 16, 125–142.
Laurin, M. , Messacar, D., & Michaud, P. C. (2023). Financial literacy and the timing of tax-preferred savings account withdrawals. Journal of Accounting and Public Policy, 42(2).
Lin, B. , & Jia, Z. (2019). Tax rate, government revenue and economic performance: A perspective of Laffer curve. China Economic Review.
Mahadevan, R., Amir, H., & Nugroho, A. (2017). How pro-poor and income equitable are tourism taxation policies in a developing country? Evidence from a computable general equilibrium model. Journal of Travel Research, 2017, 334–346.
Mateus, C. , & Mateus, I. B. (2021). Does a VAT rise harm the tourism industry? Portuguese evidence. Tourism Management, 83.
Moučková, M. , & Vítek, L. (2018). TAX LITERACY. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 66(2).
Muehlbacher, S., & Kirchler, E. (2008). Effort and aspiration levels in tax compliance decisions.
Murarka, L. , & Oates, K. K. (2020). Financial literacy in millennials. Journal of Humanities and Social Sciences Studies, , 2(6), 41–54.
Neuberger, L. , Carroll, D. A. , & Bastante, S. (2022). Taking financial literacy downtown: Leveraging community partnerships to increase communication of essential financial information in an urban area. Education and Urban Society.
Nichita, A. , Batrancea, L. , Marcel Pop, C., & Batrancea, I. ,. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics.
Nichita, A., Batrancea, L. , & Marcel Pop, C. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics, 57(5).
Nilsson, J. E. (2018). New Keynesian policy The revival of each policy maker’s dream.
Patil, A. , Niranjan, L. R., & Patavardhan, R. ,. (2024). An In-Depth Investigation Into Financial Literacy Levels in Indian Households. In Contemporary Research and Practices for Promoting Financial Literacy and Sustainability , 113–146.
Safitra, D. A., & Djamaluddin, S. (2019). The effect of the supervision activities of tax authorities on VAT compliance in Indonesia. Nova Science Publishers, Inc..
Sahoo, A. P., Patnaik, A. , Patnaik, B., & Satpathy. (2024). The Relationship between Financial Literacy and Investment Strategies among Gig Workers. In Synergy of AI and Fintech in the Digital Gig Economy , 199–216.
Santoso, A. B. , Trinugroho, I. , Nugroho, L. I., Saputro, N. , & Purnama, M. Y. I. (2016). Determinants of financial literacy and financial inclusion disparity within a region: Evidence from Indonesia. Advanced Science Letters, 1622–1624.
Semenova, G. (2020). Impact of vat raise on Russian economy. In E3S Web of Conferences (Vol. 210, p. 13028).
Shamim, A. , & Agarwala, T. (2024). Factors that Promote Financial Literacy: Tracing through a Systematic Literature Review Approach. SCMS Journal of Indian Management.
Sharma, S. (2022). Enablers to financial literacy: A DEMATEL approach. Procedia Computer Science, 520–527.
Sharma, S., Durand, R. M., & Gur-Arie, O. (1981). Identification and analysis of moderator variables. Journal of Marketing Research, 18(3), 291–300.
Siwinska, J. , & Bujak, P. (2006). The short-run macroeconomic effects of discretionary fiscal policy changes. In The Eastern Enlargement of the Eurozone .
Skott, & Ryoo, S. (2017). Functional finance and intergenerational distribution in neoclassical and Keynesian OLG models. Review of Keynesian Economics, 5(1).
Sugiyono. (2012). Metode Penelitian Kuantitatif, Kualitatif, dan R&D. Alfabeta.
Sugiyono. (2018). Metode Penelitian Kombinasi (Mixed Methods). CV Alfabeta.
Tambunan, M. R. U. D. (2021). RETHINKING TAX TREATMENT DURING THE COVID-19 PANDEMIC: A NOTE ON INDONESIA’S OMNIBUS LAW JOB CREATION TAXATION CLUSTER. In Journal of the Australasian Tax Teachers Association (Vol. 16, Issue 1). https://setkab.go.id/daftar-tautan-49-aturan-pelaksana-uu-cipta-kerja/
Tanzi, V. (2018). Rethinking keynesianism 10 years after the global crisis. Acta Oeconomica, 7–19.
Trawule, A. Y. , Gadzo, S. G. , & Kportorgbi, H. K. (2022). Tax education and fear-appealing messages: A grease or sand in the wheels of tax compliance?. . Cogent Business & Management, , 9(1).
Wanniski, J. (1978). Taxes, revenues, and the Laffer curve. The Public Interest.
Wibowo, B. P. , Larasati, M. , & Saad, R. A. J. (2025). Understanding tax compliance in indonesian smes: a structural equation modeling approach to tax literacy, knowledge, fairness, power, and trust. Ciencia y Tecnología-Serie de Conferencias.
Zaimovic, A., Torlakovic, A., & Arnaut-Berilo, A. (2023). Mapping financial literacy: A systematic literature review of determinants and recent trends. 15(12).
Published
2026-01-08
How to Cite
SANTOSO, Rudi; PUTRI, Diana.
The Impact of Financial Literacy on Tax Compliance in Indonesia with a Focus on the 12% Tax Rate.
JMK (Jurnal Manajemen dan Kewirausahaan), [S.l.], v. 11, n. 1, p. 286-297, jan. 2026.
ISSN 2656-0771.
Available at: <https://ejournal.uniska-kediri.ac.id/index.php/ManajemenKewirausahaan/article/view/6849>. Date accessed: 23 jan. 2026.
doi: https://doi.org/10.32503/jmk.v11i1.6849.
Section
Artikel Ilmiah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
