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Canada's largest production company, Vancouver-based Insight Film Studios Ltd., is in a dispute with the Canada Revenue Agency that the company says could threaten the future of its business.

Maryvonne Micale, vice-president of marketing and communications at Insight, told The Globe and Mail yesterday that the company has been forced to lay off 28 of its 110-person staff since the beginning of the year, and is currently unable to secure bank financing for future projects.

The company - whose multimillion-dollar production slate includes Battle in Seattle with Charlize Theron and the forthcoming Ashton Kutcher-Michelle Pfeiffer movie

Personal Effects - is currently lobbying Ottawa rather than taking legal recourse because that might "take up two years or more," Ms. Micale said.

"In the meantime," she said, "Insight can't start any new productions. ... So as work is finished people are temporarily laid off."

So far, Insight has managed to rehire 10 staff members back on contract. "We are still working," Ms. Micale explained. "But we don't have the ownership in the productions. Basically our banks don't want to get involved when [we are] in dispute, because what if we weren't going to win? Banks are very conservative. We have something like nine movies we are still going to be working on but Insight won't own them."

This move by Insight will protect the productions should the company lose its case, she said.

The tax bill had come as a surprise to the company. "We were told [previously] that the way we were calculating our tax credits was all fine, but now we're being told that ... we weren't calculating it right," Ms. Micale said.

No one from Insight would confirm exactly how much money is in dispute.

"Insight is not going bankrupt and we are not going under," Ms. Micale said, in an effort to quell rumours that have begun to circulate around the local film industry. How long it takes to resolve the issue will be crucial though.

"We'll still be in business," she insisted. "But we could be smaller."