Loophole

Business, Legal & Accounting Glossary

Definition: Loophole



Full Definition of Loophole


loophole is a weakness or exception that allows a system, such as a law or security, to be circumvented or otherwise avoided. Loopholes are searched for and used strategically in a variety of circumstances, including taxes, elections, politics, the criminal justice system, or in breaches of security.

A loophole in a law often contravenes the intent of the law without technically breaking it. For example, in some places, one may avoid paying taxes to the jurisdiction by forming a second residence in another location, or a commercial property can be built in a residential zone if it is made also for residential use.

In a security system, the one who breaches the system (such as an inmate escaping from prison or a terrorist) exploits the loophole during breach. Such weaknesses are often studied in advance by the violator, who spends time observing and learning the routine of the system and sometimes conducts surreptitious tests until such a loophole can be found.

An example of a legal loophole:

  • In 2005, Wal-Mart planned a store in Calvert County, Maryland. While a law in the county restricted the size of a retail store to 75,000 square feet, Wal-Mart considered a plan that would dodge this restriction by building two separate smaller stores. Though Wal-Mart later withdrew this controversial plan, the plan highlighted a legal loophole.

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Definition Sources


Definitions for Loophole are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 24th April, 2020 | 3 Views.