Poland’s shadow economy accounts for 17.7% of GDP, or more than PLN 800 billion, while in the cigarette segment alone the state budget loses PLN 2.8 billion annually. The biggest problems are visible in industries subject to high excise duties, where illegal trade increases after price hikes. Across the economy as a whole, however, the share of the shadow economy is declining thanks to better economic conditions.
“The share of the shadow economy in Poland is low. Intuitively, however, we know that there are still many areas where our measurements could be improved. That is why, together with the Ministry of Finance and other ministries, we are launching a new research system that takes into account various data sources,” Marek Cierpiał-Wolan, President of Statistics Poland, tells Newseria.
“The shadow economy in Poland is declining. This is the result of relatively strong economic growth last year and this year. However, there are sectors of the economy where its share is rising. One example is the nicotine sector. In the cigarette market, the share of the shadow economy almost doubled last year, which resulted from a drastic increase in tax rates, specifically excise duty,” says Jacek Fundowicz from the Institute for Forecasts and Economic Analyses.
In its report “The Shadow Economy 2026”, the Institute for Forecasts and Economic Analyses indicates that the increase in excise duty on tobacco products translated into a 13% decline in legal cigarette sales. Budget revenues rose by only around 3%, a pace close to inflation. According to estimates, the gap between planned and actual revenues amounted to around PLN 6 billion, while the cigarette market alone costs the budget around PLN 2.8 billion annually.
“Sales of cigarettes on the legal market decreased by 13%, while budget revenues increased by around 3%, which is roughly equivalent to the inflation rate. This market was naturally taken over by criminal groups involved in placing smuggled or illegally manufactured products on the market,” Fundowicz points out. “E-cigarettes are sold through websites hosted on foreign servers and shipped directly to consumers from warehouses also located outside Poland. Such sellers have no excise duty obligations towards the Polish budget. In theory, consumers should pay the excise duty, but that is obviously impossible.”
In recent years, Poland has moved from having one of the lowest levels of excise duty on tobacco products in the European Union to a level higher than in many EU countries. In 2025, excise duty on cigarettes rose by 25%, while in subsequent years the pace of increases is expected to reach 20% in 2026 and 15% in 2027. Even larger increases applied to smoking tobacco: in 2025 the rate rose by 38%, with further increases of 30% and 22% planned for 2026 and 2027, respectively.
The changes also apply to other nicotine products. In the case of heated tobacco sticks, excise duty increased by 50% in 2025 and is then expected to rise by 20% and 15% in the following two years. The most dynamic increases are planned for e-cigarette liquids: after a 75% rise in 2025, rates are set to increase by a further 50% in 2026 and 25% in 2027.
“Just a few years ago, Poland had one of the lowest levels of excise duty on tobacco products, with only Bulgaria having a lower level. In 2025, taxes were already lower than in Poland in five EU countries, and after the latest excise duty increase in 2026, as many as 14 EU Member States have a lower level of excise duty on tobacco products than Poland,” emphasises the expert from the Institute for Forecasts and Economic Analyses.
According to the report “The Impact of Excise Duty on the Tobacco Products Market in Poland”, prepared by the Institute of Public Finance at the request of the Economic Freedom Foundation, a 10% increase in the fixed excise duty rate leads to an approximately 1% increase in consumer spending on cigarettes, while reducing the number of legally sold cigarettes by around 9%.
“In 2026, we had another excise duty increase from January. We do not yet have data on how the market reacted, but we can be certain that the share of the shadow economy has increased. Another large excise duty hike has been announced for 2027, so if the planned path of excise duty increases does not change, we can also expect a further rise in the share of the shadow economy in the market,” Fundowicz says.
Similar mechanisms can also be seen in other industries subject to high taxes or regulation. According to the IPAG report, up to 23 million litres of 100% illegal ethyl alcohol may have been sold in Poland in 2025. Estimated losses to the state budget from this alone may have reached PLN 1.8 billion.
The phenomenon is also present in other segments of the economy, including the property rental market and the trade in medicines and dietary supplements. In these areas, the problem involves both unregistered business activity and the sale of products that do not meet quality standards. The report indicates that the development of technology and online trade makes it easier for such activity to operate outside the official economy.
In practice, the shadow economy includes both completely illegal activity and legal economic activity hidden from the state. In the statistics of Statistics Poland, it is referred to as the non-observed economy. It consists of three main elements: hidden activity conducted by registered companies, unregistered work, and illegal activity.
“The shadow economy is an inherent feature of every economy. The only question is how to measure its scale. Of course, this is a multidimensional problem and depends on many factors, including legal, organisational and tax regulations. Statistics Poland measures the shadow economy in seven areas, and we naturally approach this in accordance with the methodology developed by Eurostat and the United Nations,” says Marek Cierpiał-Wolan, President of Statistics Poland.
Statistics Poland measures the scale of the phenomenon in several areas, including underreporting of turnover by enterprises, unregistered employment and selected forms of criminal activity, such as smuggling or illegal production of excise goods.
According to Statistics Poland data, the non-observed economy accounted for 8.3% of GDP in 2023, compared with 11.9% in 2020. The largest part consisted of hidden activity within legal companies, at 6.7% of GDP, or around 81% of the total. Unregistered work accounted for 1.4% of GDP, or around 17%, while illegal activity represented 0.2%.
The largest share of the non-observed economy falls within trade and services: more than one third is linked to trade and hospitality, while around 18% is connected to construction. These are sectors where it is easier to hide part of turnover or employment, although the scale of the phenomenon may be underestimated.
“There are certainly some imperfections in these studies, because in order to properly measure the shadow economy, it is necessary to integrate many data sources, including high-frequency data from payment cards, mobile telephony, booking portals, the internet obtained through web scraping, and of course data from administrative sources. We also need soft data based on somewhat indirect questions, which will allow us to capture the process and the scale of the shadow economy,” Cierpiał-Wolan assesses.
The scale of the phenomenon is influenced by factors such as high energy and financing costs, instability of tax law, rising labour costs and increases in excise duty. Symbolically, this means that in 2026 the so-called “day of exiting the shadow economy” fell on 5 March. This corresponds to 65 days of activity outside the official economy.
“Until now, we have used standard tools to measure the shadow economy, namely sample and qualitative surveys. Today, however, we know that in order to estimate it properly, different data sources are needed. Only then, by having for example data on the value of sold production or employment levels derived from official documents and comparing them with responses from entrepreneurs, will we be able to draw conclusions about the difference between the unregistered economy and reality,” explains the President of Statistics Poland.
Statistics Poland has announced a change in its approach to studying the shadow economy. New analyses are expected to make greater use of administrative data and high-frequency sources, such as information from electronic payments, mobile telephony and the internet. The office is working on solutions that will make it possible to better capture the scale of the phenomenon and reduce underestimation resulting from traditional methods.
