Conflicts of interest at CARF: what do the new controls mean for taxpayers?

CARF’s new Integrity Policy expressly recognizes that the parity-based composition of its panels creates a high-risk context and, for that reason, requires specific controls. For companies with relevant proceedings before the Council, the issue matters because it concerns the very institutional conditions under which tax disputes are decided.

 

The parity-based composition is one of the central features of Brazil’s Administrative Council of Tax Appeals (CARF): its panels bring together members appointed by the National Treasury and by organizations representing taxpayers.

CARF’s new Integrity Policy, established by Ordinance CARF/MF No. 2,325, of August 5, 2026, expressly recognizes that this structure creates a “high-risk context” and, for that reason, requires specific structural controls.

This recognition does not mean that parity or the council members’ professional background represent, in themselves, an integrity problem. The point is different: in a body that decides disputes with significant economic impact, it is essential to identify and address concrete situations capable of compromising, or objectively calling into question, the impartiality of the decision.

The Policy itself establishes impartiality and technical independence in panel decisions among its principles, and identifies three especially critical processes: managing conflicts of interest, rapporteur assignment and access to sensitive information.

For companies with relevant proceedings before CARF, then, the new Policy does not address only the Council’s internal governance. It acts on the conditions necessary for decisions to be made impartially, independently and reliably.

 

Recusal rules already existed. What changes?

CARF’s Internal Regulations already provide for grounds of recusal for council members. These include situations involving economic or financial interests, certain prior professional relationships, family ties and other circumstances capable of compromising a member’s participation.

Ordinance No. 2,325 does not, therefore, introduce the treatment of conflicts of interest at the Council. The change lies in incorporating the issue into a permanent system for managing integrity risks.

Public officials must declare the existence or absence of conflicts at the start of their term and whenever there is a relevant change in their situation. Where grounds for recusal exist, they must abstain from taking part in the deliberation.

In addition, the management of conflicts of interest itself is now classified as a critical process, subject to specific controls, monitoring and review.

In practice, the perspective changes: instead of treating the conflict merely as an isolated problem, identified once a given judgment is already close, the new structure seeks to identify, prevent and address the risk before it can compromise the decision.

This preventive logic matters directly to the taxpayer. A recusal situation identified only after the judgment can generate challenges, new procedural incidents and prolong a dispute that could already be closed. Identifying it in advance reduces that risk and contributes to the security of the decision-making process itself.

 

Taxpayers should also pay attention to the panel’s composition

The primary responsibility for declaring grounds for recusal and conflicts lies with the public official. This does not mean, however, that companies and their advisers should ignore the issue. In relevant proceedings, knowing the panel’s composition is already part of preparing for the judgment.

Precedents, legal positions and the panel members’ decision-making history are normally analyzed. That same preparation may reveal some objective circumstance that deserves evaluation under the recusal rules.

CARF’s own Internal Regulations allow such situations to be declared by the council member or raised by the interested party. Caution is essential here. Professional background, legal disagreement or a history of votes against the taxpayer do not, by themselves, amount to a conflict of interest.

Parity-based composition presupposes different professional and institutional backgrounds. Likewise, the fact that a judge repeatedly adopts a particular interpretation of tax legislation is not grounds for questioning their impartiality.

Eventuais arguições devem ser excepcionais, objetivas e baseadas em circunstâncias concretas. Mas o extremo oposto também não parece adequado: se, em um processo de elevada materialidade, a empresa identificar situação potencialmente relevante para as regras de impedimento ou suspeição, essa circunstância deve ser analisada antes do julgamento.

Sound management of tax litigation requires distinguishing between a disagreement over legal interpretation, which is inherent to any collegiate body, and a situation that could actually compromise impartiality.

 

Rapporteur assignment and sensitive information also enter the control system

The Integrity Policy is not limited to judges’ personal conflicts. The Ordinance also classifies rapporteur assignment and access to sensitive information as critical processes.

Including rapporteur assignment is relevant because the impersonal distribution of cases is one of the basic elements of reliability for any adjudicating body.

CARF already has drawing and distribution mechanisms. By formally classifying rapporteur assignment as a critical process, the new Policy adds a layer of risk management and reinforces the importance of mechanisms that are impersonal, traceable and subject to monitoring.

For companies discussing significant amounts, it matters to know that the assignment of the rapporteur sits within a control structure designed to reduce the risk of undue interference. The treatment of sensitive information may have an even more direct impact on taxpayers.

Tax proceedings may contain contracts, details of corporate reorganizations, financing structures, business policies, margins, prices, international transactions, personal data and business strategies.

In certain disputes, the defense itself requires presenting information that the company would hardly make available outside the proceeding. For that reason, how that data is accessed and handled is a relevant part of the integrity of the litigation.

The Policy links transparency to compliance with rules on access to information, data protection and other applicable standards. But responsibility for the proper handling of information does not rest with CARF alone.

 

Companies also need governance over what they place in the case file

Antes da apresentação de grandes volumes de documentos, bases de dados ou informações estratégicas, é recomendável identificar o que efetivamente é necessário à defesa, quais documentos contêm dados pessoais ou informações empresariais sensíveis e quais procedimentos devem ser adotados para seu tratamento adequado.

This care should not limit the defense or prevent the presentation of elements needed to demonstrate the facts. Its purpose is to ensure that the company knows the content being submitted, assesses its relevance and adopts appropriate precautions for its transmission, storage and access.

Protecting information, therefore, begins before it is even submitted to the adjudicating body.

 

Transparency and controls do not guarantee an outcome. They guarantee reliability

The new structure also draws attention to an important distinction. Controls over conflicts of interest, rapporteur distribution and access to information do not exist to guarantee any particular decision for the taxpayer.

A company may receive an entirely unfavorable decision even if all these mechanisms have worked properly. The objective is different.

Transparency, traceability and integrity controls help ensure that the outcome results from an institutionally reliable process.

This distinction matters especially in an administrative tribunal with a parity-based structure that decides disputes with major economic impact.

Taxpayers may disagree with the outcome and challenge it through the procedural means available. But there must be confidence that the decision was made by an impartial panel, that the case was distributed impersonally, and that any conflicts were properly identified and addressed.

The integrity of the procedure does not replace the legal quality of the decision. It is one of the conditions for its legitimacy.

 

What should companies observe, in practice?

The new Integrity Policy is predominantly directed at CARF’s own organization and officials. Even so, its implementation raises points that deserve attention from companies with relevant proceedings before the Council.

The first is the panel’s composition. In more significant cases, preparing for the judgment should include identifying any objective circumstances that may fall under the recusal rules, without confusing them with council members’ professional background or legal views.

The second is case distribution and rapporteur assignment. How the controls over this process will be implemented deserves monitoring, especially since the Policy itself now classifies it as critical.

The third is governance over the information presented in proceedings. Companies should know the content they make available to the Council, identify sensitive information, and assess in advance the need for, and the manner of, presenting strategic documents, personal data and confidential information.

The fourth is incorporating integrity and confidentiality into litigation management. These issues should not be examined only after a problem arises. In relevant cases, they need to be part of risk assessment from the outset.

The new Integrity Policy does not change tax legislation or the legal arguments discussed in the proceedings. It acts on the institutional conditions under which these disputes are decided.

For companies involved in proceedings of significant materiality, this matters. Impersonality in distribution, early identification of conflicts, protection of information and independence of the panel members are components of the security required for administrative litigation to function.

Transparency and integrity controls do not, and should not, guarantee a favorable outcome for the taxpayer. Their role is to increase confidence that the outcome results from an impartial and institutionally reliable process.

 

What this series reveals about the governance of tax litigation

This article closes the series on CARF’s new governance rules. Across the four pieces, we examined the general architecture of the new Integrated Management System and its possible effects on quality and consistency of case law, anti-bribery prevention and the integrity of the decision-making process.

Taken together, the new policies show that managing tax litigation is not limited to the merits of the arguments under discussion. Time, predictability, the integrity of institutional relationships, conflicts of interest, information protection and the reliability of the decision-making process are also part of companies’ risk equation.

This conclusion has effects in two directions. On one hand, CARF takes on commitments related to speed, consistency of decisions, prevention of undue interference and the treatment of institutional risks. On the other, companies are called upon to assess their own governance: how they monitor case law, review contingencies, oversee third parties, conduct interactions with public officials and protect the information presented in proceedings.

Ordinances No. 2,321, 2,324 and 2,325 establish an ambitious framework, but their publication is only the starting point. The impact for taxpayers will depend on the implementation of the controls, the transparency of the results and the ability to turn formal commitments into lasting practices.

For that reason, monitoring these policies should not be limited to the moment they are issued. It will be necessary to observe, over time, whether there is a reduction in timeframes, greater consistency in case law, effective treatment of integrity risks and strengthened confidence in the decision-making process.

A technically sound defense remains at the center of tax litigation. The series shows, however, that managing it requires a broader view: the quality of the outcome also depends on the quality, integrity and reliability of the procedure that leads to it.