Tax system hampering service sector growth

BEIJING - The heavy tax rate imposed on China's service sector will make it difficult to realize the country's growth target for the industry between 2006 and 2010, industry insiders said.

"Many companies in the tourism industry operate on very narrow profit margins, and the government's high taxation has pushed some to the edge of bankruptcy," said James Dong, president of China Express Tours, a Shanghai-based travel agency.

Dong's company has to pay around 7 percent of its earnings in taxes, which is hefty given the sector's feverish competition that has resulted in low margins.