What is the difference between a tax haven and a tax shelter?

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A tax haven refers to a country or jurisdiction that offers certain benefits to individuals and businesses in terms of low or no taxation on income, capital gains, or financial transactions. These jurisdictions typically have lenient tax laws, banking secrecy provisions, and favorable regulatory environments, making them attractive for people or companies looking to legally reduce their tax liability.

On the other hand, a tax shelter is a legal strategy or arrangement that is used by individuals or businesses to reduce their tax burden by taking advantage of specific tax incentives, deductions, or exemptions provided by tax laws. Tax shelters can be created through various means such as investing in tax-exempt securities, utilizing retirement plans or trusts, or engaging in specific business activities that qualify for tax breaks. Tax shelters are typically intended to minimize tax liabilities within the boundaries of the existing tax system.

In summary, while both tax havens and tax shelters are used to reduce taxes, tax havens generally refer to entire jurisdictions with low tax rates and lenient laws, while tax shelters typically refer to specific legal strategies or arrangements within the existing tax system.