Canada is in the midst of a civil war -- figuratively speaking, at least. Province is facing off against province, each taking stabs at the other, drawing blood. And it might only get worse.

On Dec. 21, Ontario raised its labor tax credit for foreign production shooting in the province from 11% to 18%. For Canadian productions, the credit was hoisted from 20% to 30%.

The province was responding to increased pressure from the film industry in Ontario, which had staged a rally earlier in December urging Ontario's Liberal government to keep a campaign promise.

Roughly a week later, neighboring province Quebec made its countermove, besting Ontario by raising its credit for foreign productions to 20%.

That left the other filmmaking province, British Columbia, looking like a quaint ma-and-pa store with its tax credit of 11%. Film companies in that province howled and urged the government to meet the Eastern moves.

So far, the B.C. government has not, and it might suffer the consequences if productions and companies go east.

"If the tax credits stay at the status quo, at 11%, then we will absolutely leave the province. Lock stock and barrel. Corporate headquarters and everything," says Shawn Williamson, co-founder of Brightlight Pictures, producers of the film "White Noise."

Williamson has four other films in preproduction, including "Dungeon Siege," a $50 million-$60 million video-game adaptation. With $130 million in production potentially on the line, the difference between staying in British Columbia or moving to Ontario could amount to several million dollars for the company.

Although the panic is palpable within the B.C. film industry, some are skeptical that the government will bow to pressure. "The B.C. Liberals are notorious for not listening to people," one insider says. Indeed, the new finance minister repeatedly has said that he will not be forced into a "knee-jerk reaction."

Some even have accused Ontario of timing the tax credits with the start of pilot season, a charge Donna Zuchlinski of the Ontario Media Development Corp. denies.

"This is not timed to any production schedule," Zuchlinski says. She points to many factors, including a stronger Canadian dollar and increased competition for location work, that caused the change in the tax scheme. "All filming jurisdictions around the world have had to get smarter and more competitive with what they're offering."

That competitiveness has seen U.S. locales become more aggressive in an effort to keep production in the United States. New York City recently introduced a 5% tax credit, in part, to keep producers from going to Toronto.

In B.C., the province's premier, Gordon Campbell, is getting involved. His Tuesday meeting with film industry representatives to discuss raising the tax credit was met with some optimism. "The mood is very positive; it's very hopeful," Qiujing Wong, a spokeswoman for the lobby group Motion Pictures Production Industry Assn., said after the meeting. "(Campbell is) listening to us, he's open, and he's trying to work with us to make us competitive."

Meanwhile, Ontario has delivered another salvo. The city of Toronto is planning to peg the Canadian dollar at 78 cents American for all city services used in the film industry as a type of "floating discount" to guarantee certainty of cost. The services include parking fees, city department fees and city labor charges. It also might include police services, though that currently is being negotiated.