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Bogdan Mróz 6.1 INTRODUCTION The shadow economy is an inseparable part of today’s economic systems. In economies in transition, such as Poland and other post-communist countries, the weight of unregistered forms of economic activity is substantial, but researchers have yet to reach agreement on its quantitative measurement. Over the past two decades of systemic transformation in Poland, shadow economy estimates ranged between 15 per cent and more than 27 per cent of GDP, according to methods picked by individual experts or researcher centres. The switchover from a centrally planned economy to the free market system in Poland has fundamentally changed various walks of social and economic life, and affected the behaviour of economic agents (companies and consumers). The initial phase, sometimes referred to as ‘systemic interregnum’ or ‘systemic vacuum’, was conducive to the emergence of new forms of unregistered income-earning activity, previously unknown in the socialist ‘economy of shortage’. As the new economic order’s foundations and institutions grew stronger, some shadow economy forms characteristic of the pioneer stage of Polish capitalism were disappearing, to be replaced by others, commensurate with the new realities and taking advantage of, for example, a vague regulatory environment, lack of inspection mechanisms, economic policy mistakes etc. (Kloc, 1998). The sheer magnitude of unregistered economic activity entails a host of adverse consequences for the official sector, stifling microeconomic efficiency (Bouev, 2002). The most perceptible of these include lost or reduced revenue of the Treasury, affecting the public finances via budget deficit, and thus impeding the...