Monte-Carlo simulations revised : a reply to Arqus

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