Breaking tax stigma through financial literacy among rural start-up entrepreneurs in Indonesia

Abstract

Purpose: to examine the role of integrated financial literacy in reducing tax stigma and strengthening tax awareness among rural start-up entrepreneurs in Indonesia by improving financial management, bookkeeping practices, tax literacy, and business formalization readiness.

Method: this study employed a participatory action research design with a descriptive qualitative approach involving 50 rural start-up entrepreneurs in Kedungotok Village, Indonesia. Data were collected through field observations, semi-structured interviews, documentation, and participatory mentoring, and were analyzed using thematic analysis supported by descriptive statistics.

Findings: integrated financial literacy significantly improved participants' bookkeeping practices, tax literacy, and awareness of business legality while reducing negative perceptions toward taxation. The intervention also increased entrepreneurs' confidence in managing financial records, understanding tax obligations, and participating voluntarily in the formal taxation system, demonstrating the potential of financial literacy to support sustainable business formalization in rural areas.

Implications: integrated financial literacy can reduce tax stigma and support voluntary tax compliance among rural entrepreneurs, guiding the development of effective financial and tax education programs.

Originality: by integrating financial literacy and behavioral taxation perspectives to explain how financial education reduces tax stigma among rural start-up entrepreneurs.