Egypt's government approved a temporary 5 per cent tax on wealthy individuals to fund social programs, the cabinet said in a statement.

The tax rise, which will apply to those earning over one million Egyptian pounds ($142,200) a year, still needs to be passed by Interim President Adly Mansour before it can be implemented and will only be applied for a temporary period.

"In pursuit of the principle of social justice, the cabinet has approved the suggested amendment from the finance ministry on the income tax law with regard to implementing an additional temporary five percent tax on income more than one million pounds," the statement said.

After the army's ouster of freely elected Islamist president Mohamed Mursi in 2013, a presidential election to be held this month is widely expected to be won by army chief Abdel Fattah al-Sisi.

However, the new president faces severe economic challenges. Egypt's economy has been hammered for the past three years as turmoil following a mass uprising in 2011, calling for social justice and better distribution of wealth, drove foreign investors and tourists away.

The country of 85 million has been struggling to curb a budget deficit that swelled to around 14 percent of GDP last year and is under pressure to cut subsidies that eat up around a fifth of its budget but risks triggering protests if it does so.

Those subject to the temporary tax will be given some choice over which areas their funds can be spent in.

"It will be allowed for the (tax payer) to use the amount of the tax to finance one or more service projects from the public projects in the education, health, agriculture, housing or infrastructure sectors in the various provinces and cities across the country," the statement said. - Reuters