President Donald Trump on Tuesday announced that federal funding would be paused while his administration conducts a review as "good stewards of taxpayer dollars", and ends progressive programmes.
The order, which came through a memo issued by the Office of Management and Budget, caused confusion over whether the cuts would affect welfare, health benefits, education programmes and other initiatives.
White House press secretary Karoline Leavitt, in her first media briefing, said the move was aimed at cutting costs to US taxpayers and would not affect assistance going to individual people.
"It is the responsibility of this President and this administration to be good stewards of taxpayer dollars. That is something that President Trump campaigned on," Ms Leavitt said.
"This is not a blanket pause on federal assistance and grant programmes from the Trump administration."
She said it was a means to end diversity programmes in the federal government and funds for environmental initiatives. "It means no more funding for transgenderism and wokeness across our federal bureaucracy or agencies," Ms Leavitt said.
Several government officials said states were locked out of the Medicaid payments systems.
"Connecticut’s Medicaid payment system has been turned off," Senator Chris Murphy said in a post on X. "Doctors and hospitals cannot get paid. Discussions ongoing about whether services can continue. Medicaid covers health care for millions of seniors and covers 40 per cent of births in America."
The decision is expected to be challenged in court by attorneys general, who called the move unconstitutional.
"This administration has unleashed mayhem with its latest illegal action, affecting kids who rely on federal funds for their next meal, seniors on Medicaid, and law enforcement fighting drug and gun crime," New York Attorney General Letitia James said in a post on X. "These chaos cuts jeopardise resources that millions of Americans rely on."
White House deputy chief of staff Stephen Miller said: "It's important to understand that it's a review process, so that we have control, democratic control, over the operations of government. This doesn't affect any federal programmes that Americans rely on, full stop."
The move also comes after Mr Trump issued an executive order declaring a 90-day pause on nearly all foreign assistance. Israel and Egypt are reportedly exempt, but the freeze affects hundreds of missions and projects around the world.
Ms Leavitt said the Trump administration blocked $37 million from being dispersed to the World Health Organisation, the UN agency from which the President withdrew through an executive order on his first day in office.
She also said that the OMB and the Department of Government Efficiency, the organisation Mr Trump created that is being run by his ally Elon Musk, would also cut funding for Gaza.
"Doge and OMB also found that there was about 50 million taxpayer dollars that was going out the door to fund condoms in Gaza – that is a preposterous waste of taxpayer money,” Ms Leavitt said.
In response to a question by The National for clarification, the press office responded with an article on Fox News that quoted an unidentified White House official as saying that the decision was made at the weekend.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
