I've always wondered how the Ministry is funded. The first decision to make is if you think the Ministry is funded via tax or some other means.

There are various options for "other means":

1. Curse-breaking expeditions.
   
   
2. Taking funding from the Muggle treasury.
   
   
3. A literal goose that lays eggs made of gold, kept in the Ministry basement.

There are fics where I can see these ideas, and similar ideas, working.

However, my own preference is tax. The Ministry in canon is a prototypical bureaucracy, almost a parody of Muggle government. I prefer to retain that in my worldbuilding, while simultaneously making the Ministry a bit more functional/grounded to reduce the parody element and increase reader immersion/realism. For me, that means the Ministry needs to be funded by tax.

The second question is: what tax?

Income tax is a fairly new invention - in Britain you didn't have a regular annual income tax until 1842. Before then, tax was rather more varied: taxes on land, tariffs on trade, sumptuary taxes on particular goods, stamp taxes on specific transactions, whereby the transaction wasn't legally enforceable until you had paid for the government stamp, and a wide system of licences. For example, you had to buy a licence from the government if you wanted to use hair powder.

I think this is a good model for the magical world. It permits for interesting worldbuilding around specific wizarding activities, creates opportunities for as many tax intricacies and oddities for whatever your purpose might be as an author, and reinforces that slightly alien, slightly old world feel that the wizarding world has in canon.

You can easily imagine a wand tax, for example, and a broom duty. Different taxes on different potions, depending on type (e.g. beauty potions heavily taxes, medical potions could be duty-free). A house-elf licence which requires annual renewal. Ministry licences to legally use certain spells, such as spells to produce clothing, parchment, quills, etc.

So:

1. Do you prefer a Ministry funded by taxation or other means?

2. If other means, what means do you envisage?

3. If tax, what taxes do you see working?

 

Does taxation actually work with such a small population at such a small scale? Genuinely don't know.

Maybe they get funded by curse-breaking expeditions like you say, selling permits and taking cuts from what's found. They probably charge for all the tests and licenses in general they give out too.

 

House elf tax is a good one. Slaves for the wealthy who you pay lots for but not to them, I like the effect this has on them as a luxury purchase.

 

I like a combination, personally.

I think that the primary method would be taxes, such as inheritance and duties or levies on specific taxes, but also fines and fees levied against those of a more nefarious bent.

And then the combination comes in from licensing fees levied against curse breaking expeditions, in the form of fees paid for expeditions in country and fees levied against British curse breakers undertaking foreign adventures.

 

I prefer a ministry funded through tax, permit and licence fees, fines and certain monopolies.
The ministry collects tax on land and transactions. The ministry issued various permits and licences for things like aparation, Floo connection, setting up various businesses etc. Fines for actions resulting in oblivations or spell demage requiring ministry intervention. Floo powder and port keys are ministry monopolies.

I don't favour a ministry collecting income, wealth or inheritance taxes as the setting seems to favour accumulation of wealth with families over a long period of time.

 

Purchasing land from non-magical sources could be a good, if infrequent, source of revenue. The ministry would have to insert itself between the wizarding buyer and the owner of the land, to avoid any magical manipulation or threats to the statute. The galleons are just a bonus, of course. I don't see a proper monetary transaction going on, the wizard pay the ministry in galleons and the ministry handle the rest by using the muggle government, having the latter deal with the money and the bureaucracy of their side. Maybe a small magical favor from the part of the Ministry of Magic as compensation.

 

I really don’t like the idea of income via curse breaking.

It always bothered me that in fics where Bill Weasley busts a few vaults a year.

There simply shouldn’t be that many vault/tombs in the world with worth while treasure. After a few hundred years of magical adventuring and searching for tombs, there would be so few left if any they would be lucky to find one a decade of that.

Also it would create a feast or famine economy. When Spain started plundering the new world they tanked the cost of silver in Europe for a generation. Imagine the ministry finding one Uber vault with gold and gems, the galleon would be devalued overnight

I like the idea that the magical world lives mostly of funding from the muggles even with out them knowing it. The ministry of magic was founded and split from real parliament, but the historic funding was kept. The Muggles don’t see/notice the funding go missing every year.

Then there is small supplementary income such as licences etc.

 

I mean, this can always be explained by in-fic lore.

I'm the last person who wants Ancient Magicks™ to supersede modern magic, just like how ancient technology shouldn't supersede modern technology, but it's easy to say that ancient curses can be hard to break since the means and methodology of the curse are lost forever.

It's not like the muggle world, where the Spanish raided extant empires for silver, where the Egyptians built monoliths and hid gold beneath, where the ancient Chinese erected terracotta soldiers to protect their legacies. A witch or wizard could enchant any hidey-hole anywhere. Many could collapse at the warlock's death. Many could be passed along to family. Some might endure. And they could be anywhere. Anywhen. Anyhow.

It's not hard to imagine a world where a wandering curse-breaker is walking along the welsh countryside and feels a tickle on their consciousness. He puts in a floo-call, to either Gringotts, the Ministry, Hogwarts' ancient runes department, whatever. And then they find something hidden behind a curse or charm on that one swamp! that endures and we didn't know why or even remember that it never changed until now

Imagine a curse-breaker chilling in bum-fuck nowhere Kansas. He somehow senses the trace of magic that came before, and finds a Cherokee burial ground that was protected by a legit magical shaman.

Imagine an innocuous hill in Italy. A wandering warlock ventures atop it on the 147th (3x7x7) anniversary of the 3rd sunrise of 7th month's high-noon of the 7th century. He feels a tickle. The curse breaker is able to unlearn the hidden secrets of the hilltop and returns to Britain with a chalice of emerald fire, and with applied modern research, the world is changed evermore by the Floo.

Albus Dumbledore then revolutionzed the charmswork of flame by somehow making the connection to dragon's blood, and manages to bewitch the flame of the floo to burn everlasting, disparate from the chalice, and Gubraithian fire is born. Or whatever

It seems a risk-reward thing? It shouldn't be a reliable source of income for the Ministry, but a vastly empowering and occasionally lucrative one, and one that will rarely deplete itself, because they could be goddamn anywhere, anywhen, and anybody. And all magical governments field educated sorcerers to find them/find when/find how.

But yeah. The answer is probably taxes.

 

I feel like the curse breaking thing is based on the idea of stuff like Aladdin's cave - absolutely massive, mythological treasure hordes. I view the origin of that treasure and more magical than based on e.g. mining.

 

For starters, I don't think they would use gold as their currency if there were any means of just making more gold, except of course the Philosopher's Stone, which most probably consider to be a myth. If they wanted a fiat, they could have a naturally lightweight, convenient fiat like everyone else. For that reason I have to rule out even something whimsically in-tune with the universe like a literal goose that lays golden eggs. Simultaneously, I don't think they could just go around plundering other countries; it seems magical Britain did not colonize half the developing world. Bill is not only working for the goblins, rather than a human collector from back home, he is almost certainly working on a team with locals. His profession is not evidence of a colonial expedition.
Yup, taxes.

 

Wand tax seems a little limited, given how most wizards seem to only buy those once in their lives. But in general excise taxes seem like the most likely explanation. And maybe "contributions" from the elite in exchange for favors have become institutionalized as well, to the point where they can't really keep their doors open with them.

 

If taxation is actually a thing, there needs to be way more magicals living in Britain than I imagine there actually is - unless they tax the goblins for every transaction, and use them as go-betweens for trading between nations etc.

 

I mean, obviously a spell tax. The ministry is capable of monitoring every spell cast by a wand, so why not have a flat spell tax rate. Obviously it would be fairly low, but it would make up for say VAT lost on conjured items.
Different spell groups might have higher, lower or no tax rates associated with them, and other spells could merit a fine upon casting.

A spell tax with a flat rate would also be regressive, which could explain why certain families like the Weasleys do so much work around the house by hand (A pureblood family making its children do work by hand sounds more like a punishment than a character building exercise if there's no underlying issue forcing them to do so.).

If animagus transformations are generally untraceable, then that would explain animagus registration. Some sort of spell is placed on the animagus to monitor each transformation, so that a bill can be sent by owl post.

 

I thought most of the housework the children did was because they were underage and the Weasleys wanted to enforce the rules against them doing magic outside of school, even though those are apparently not hard and fast in wizarding households.

 

I heavily doubt that, crimes would be much much easier to solve if that was the case.

 

I'd go taxation, with an emphasis on the more historical versions of taxes on specific products and industries.

Different potions ingredients get taxed to different, sometimes massive, extents - this is why Ollivander can sell a wand for 7 galleons where a unicorn tail hair costs 10 galleons.

I like your house elf and broom ideas.

Puffskeins - a tax on the sale of them, plus a breeding license annual fee.

A luxury goods tax which basically encompasses any enchanted item that you could make for yourself but have chosen to purchase instead.

And I'd also probably imagine a tax on money made off muggles. Its been discussed here before how easy it would be a wizard to make money off of muggles without ever revealing the existence of magic. It makes sense, to my mind, that the ministry would tax this sort of thing quite heavily, under the excuse that there are costs incurred by the close monitoring that these businesses require.

 

I think wizarding taxation needs to be considered in the context of the political climate.

It's all very well saying lets tax spells, but that's absolutey not going to fly in a traditionalist wizarding society where the people who matter consider magic to be both their birthright, and practically a religion in and of itself. Can you imagine Malfoy or whoever voting through any restrictions whatsoever on magic, or the monitoing of spells required to enforce that? That's the kind of thing that gets you Dark Lords.

However, there is a flip side to this. Taxation is an excellent way to make the entry of muggleborns difficult, and also to prevent wizards from simpy making money in the muggle world and bringing it back in. How? Take a leaf out of Cuba's book and fiddle the exchange rate.

The goblins have a monopoly on exchanging pounds to galleons and are bound by treaties to do so at a rate fixed by the government. Therefore, there's an absolutely massive stealth tax on all exchanges. For example, a galleon has spending power 'in country' of £5 to the galleon. But if you want to exchange pounds into Galleons, the rate is £20 to the galleon. The mark up is all government income. The wizards quietly justify this as being necessary due to the additional Statute of Secrecy maintenance spend required by more people knowing about their world. Most Muggles don't ever realise they're being screwed.

This hurts muggleborns (a politically popular thing), prevents wizards from just gaming the muggle world (another politically popular thing) and generates significant income from incoming muggleborns and their families. A triple win.

Another tax would be a VAT type of tax on goods and services, similar to muggle Britain. Call it 20% on the basics of survival, and exponentially more on other items. Stuff related to magic is actually exempt, if not subsidized due to political pressure (allowing folks access to their birthright, differentiating wizards from muggles, etc, etc.), hence why wands are so cheap.

Specific luxury goods are very expensive, whilst things like owning magical pets or house elves require annual licenses. Property incurs a stamp duty tax on sales, and a property tax the same as the muggle side. Again, due to political pressure, certain wards or whatever might be required if you live in close proximity to muggles, with a 'Statute of Secrecy surcharge' annually for checking and maintaining them. This would make sense if you approach the goal of maintaining seperation of wizards and muggles as being a benefit in and of itself.

I can imagine specific levies eing required on people or businesses who want to enchant or alter muggle items for use in the wizarding world (cameras, wireless sets, record players, cars, trains etc) for similar reasons with a justification of it being needed to fund the Misuse of Muggle Artefacts office. Mr Weasley flouts this on a regular basis and fell foul of it with his car. This could be an explantation for why Wizards still use quills versus say fountain pens. You can get one, but they're taxed to the gills and ruinously expensive.

Other items of note are things like the floo, which is privately run, but is expensive because it incurs a big tax (like fuel duty), and the Wizarding Wireless, which requires a license in a similar vein to the UK TV license. Maybe there are also specific taxes rendered on residents to fund specific infrastructure items like the World Cup stadium (similar to US 'Stadium Taxes').

As for an income tax or business taxes, I can take it or leave it. I guess there would be some, if only for capital gains. Inheritance tax is extremely low, and not graduated by estate value.

I don't think Hogwarts or St. Mungos get any government funding, so all the Government has to do is policing, tax collection, international relations, regulation of a few standards, examinations / licensing and the rare infrasture spend on an irregular basis (no road network to maintain, no public transport, no power grid etc). No military spending either. It's a fairly light touch system as would benefit the influential and rich people pushing the laws.

I'd guess tax rates would ultimately end up around 30-50%, just the same as the muggle UK by the time you consider all our VAT and sales related taxes. Much more for the parents of Muggleborns and rather less for those with the least contact with the muggle world.

 

Nations used the hodgepodge of goods and licence taxes because until the 20th century it was really hard for governments to find out how much a person actually earned and tax them accordingly. It wasn't until near universal banking and the entailed records that it became possible. Hence, they taxed things that were easy to measure.

I expect that magic means this still applies so whatever is going to be taxed needs to be easily taxed. Objects made in large enough volumes to be common place while cheap enough to not be worth tax dodging over are good choices from an ease of taxation position, but shitty for screwing over the poor.

It also explains why Winky had so much trouble finding a new owner. Like, if you don't care about the immorality of slavery, why would you say no to a free slave, even one dismissed by her previous master? Even more so if you're a poor pureblood family without house elves.

Unless of course if house elves aren't free.

 

Rather than through taxes, maybe through fines?

The ONLY prison that they have is Azkaban, potentially with a holding cell or two in the basement of the Auror dept, prior to processing. So what's the punishment for muggle-baiting with an enchanted tea cosy? After all, they're only muggles, and they were memory charmed anyway, so they don't actually remember what happened! Throwing them to the dementors for a day will inconvenience them, but for a week and they'll be wrecked!

The Ministry expands, and adds new laws, and Byzantine structures to fund itself, add new research projects, or the Minister's new duck pond.