China needs tax reform to create a business environment favorable to continued growth, particularly in the service sector, according to a leading taxation expert.

Xu Shanda, former deputy director of the State Administration of Taxation, wants tax reform to boost China's service sector. [By Wang Ke / China.org.cn]

Xu Shanda, former deputy director of the State Administration of Taxation, told China.org.cn: "China should put tax reform on the agenda in the coming 12th Five-year Plan, to boost all industries, particularly service industries."

Xu said tax reform could help adjust China's industrial structure and promote the development of service industries, adding that the current tax system imposes an unfair burden on domestic players in the service sector.

"Superficially, the policy looks similar for Chinese and foreign-invested banks, but since Chinese banks mainly deal in RMB loans, while foreign-invested banks deal in foreign exchange loans, foreign-invested banks carry a lower actual tax burden than Chinese banks," he said.

Xu said the government should begin by adjusting business tax, a turnover tax applicable to all firms that provide taxable services, including communications, transport, construction, finance and insurance, telecoms, culture, entertainment and so on.