Value-added tax understanding, financial management, and the financial well-being of Generation Z

Abstract

Purpose: This study examines the effects of value-added tax (VAT) understanding and financial management on the financial well-being of Generation Z in Tangerang City, Indonesia, and tests whether the two factors jointly explain this outcome. Methodology/approach: A quantitative, causal-explanatory design was applied. Data were collected from 187 Generation Z respondents through a non-probability, purposive-sampling technique, using a structured online questionnaire measured on a five-point Likert scale and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The measurement model was purified over three estimation rounds, retaining 36 of 43 original indicators, and was validated for convergent validity, reliability, and discriminant validity. Findings: VAT understanding and financial management each had a positive and significant effect on financial well-being and jointly explained a substantial share of its variance, with VAT understanding exerting roughly twice the standardised effect of financial management. Practical and Theoretical contribution/Originality: The study extends the Theory of Planned Behavior into the tax-literacy domain and provides empirical evidence for designing VAT-education and financial-literacy programs targeted at digitally active young consumers in mid-sized Indonesian cities. Research Limitation: The cross-sectional, perception-based data and purposive sample limit causal inference and generalization beyond the studied population, and seven indicators, five measuring VAT understanding, had to be removed to establish a valid measurement model.