A tax-break battle has broken out in Canada over millions of dollars in Hollywood film deals, after Ontario boosted incentives for movie makers in a bid to offset pressure from a soaring Canadian doll

VANCOUVER, British Columbia (Reuters) -- A tax-break battle has broken out in Canada over millions of dollars in Hollywood film deals, after Ontario boosted incentives for movie makers in a bid to offset pressure from a soaring Canadian dollar.

Producers on Canada's Pacific Coast are threatening to move their projects east unless British Columbia quickly matches new tax breaks offered by Ontario for films and television shows produced for the U.S. market.

Vancouver, Toronto and Montreal are Canada's largest movie production centers for the international market, but all saw work drop last year as a rapid rise by the Canadian dollar cut into cost advantages over filming in the United States.

Ontario said in December it would hike its tax credit for labor costs on movies produced for the foreign market to 18% from 11%. Quebec quickly moved its rate to 20%, but British Columbia has remained at 11%.

British Columbia studios said the new rates compound problems with the currency and growing competition from outside Canada. The film industry spent more than $1.4 billion Canadian ($1.2 billion) in the province in 2003, according to the B.C. Film Commission.

"We're being hit here in B.C. by a triple threat," said Peter Mitchell of Vancouver Film Studios, which has seen plans for filming a major picture there in 2005 put on hold as the producer considers a move to Toronto.

Tax benefits have been a key element in Canada's success in luring films from the United States over the past decade. But those "runaway productions" drew the ire of U.S. politicians and prompted several U.S. states to offer their own tax incentives.

Ontario also hiked credits for domestic market productions.

B.C. Finance Minister Colin Hansen has promised to help his province's industry but will not announce how until mid-February, when the new provincial budget is unveiled.

The B.C. film industry says Ontario's plan was known for several weeks before it was announced, and producers cannot wait until February because movies wanting to film in 2005 will have set their budgets by then.