About 5,000 demonstrators marched on Manila's financial district calling for her resignation and protesting the extra provisions of the value-added tax, which immediately pushed up fuel, electricity and shipping prices.

The expanded tax provisions were the cornerstone of a package of tax revenue measures that Arroyo managed to have approved by Congress over the past year in a bid to plug the Philippines' chronic budget deficit.

However, within hours of the new tax law coming into force, the Supreme Court issued a writ suspending it on constitutionality grounds, and summoned government lawyers to a hearing on July 26 to discuss the legislation.

The court's temporary restraining order is "effective immediately and continuing until further orders," it said in a ruling.

The writ was sought by a coalition of gas station operators as well as the same group of opposition legislators who are behind the ongoing vote-rigging inquiry in Congress against Arroyo.

Cora Guidote, an economics adviser to the president, said the government would attempt to have the suspension lifted.

"It's unfortunate. The national government will work for the removal of the suspension as soon as possible," she told reporters. "It is part of the mid-term Philippine development program and we cannot afford any more setbacks."

Arroyo's foes denounced the attempted tax expansion, which came as the peso continued to fall and crude oil prices hit record highs.

"The latest E-VAT (expanded VAT) is another example of her anti-people economic impositions," said Renato Reyes, a senior leader of the leftist group Bayan, which joined the protest.

"In time, we hope to gain the widespread support of professionals and business people in fighting for Arroyo's resignation."