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Monte-Carlo Simulations Revised: A Reply to Arqus

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  • Sabrina Dorn

Abstract

This contribution revises Monte-Carlo based simulation techniques as used in Business Taxation and Accounting literature, most prominently proposed by fellows of Therefore, we focus on a methodically orientated discussion. Our results suggest the standard approach leads to biased estimates of expected discounted tax payments assuming cash flow uncertainty and incomplete loss-offset regulations. We built up critique by giving an analytical expression for expected discounted tax payments formulating the structure of probability weighted tax states in the future conditional cash flows above or be-low zero. Consequently, this enables us to evaluate the results obtained from the standard Monte-Carlo approach within a numerical analysis.

Suggested Citation

  • Sabrina Dorn, 2009. "Monte-Carlo Simulations Revised: A Reply to Arqus," ifo Working Paper Series 73, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_73
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    References listed on IDEAS

    as
    1. Rainer Niemann & Corinna Treisch, 2005. "Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria," CESifo Working Paper Series 1506, CESifo.
    2. Dahle, Claudia & Sureth, Caren, 2008. "Income-related minimum taxation concepts and their impact on corporate investment decisions," arqus Discussion Papers in Quantitative Tax Research 55, arqus - Arbeitskreis Quantitative Steuerlehre.
    3. Sureth, Caren & Langeleh, Dirk, 2005. "Capital gains taxation under different tax regimes," arqus Discussion Papers in Quantitative Tax Research 6, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series 1219, CESifo.
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    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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