Stars from around the world are walking the red carpet this week at the Toronto International Film Festival. As fans meet their idols and catch the newest film releases, behind the scenes industry insiders are busy striking deals that could boost the Canadian economy.

The streets are packed with film-lovers and filmmakers, but that could be said for Toronto at most times of the year. The city acts as living, breathing replica of New York, Chicago even Tokyo for film producers.

X-Men, Pacific Rim and Transformers are just some of the franchises shot here. In what some have described as a race to the bottom, local governments across Canada have competed on tax cuts to attract big budget film contracts in some cases almost halving their tax bill.

However, there are signs that the tax cut culture could be wrapping up. Quebec is reducing its tax incentives for film projects by one fifth. The ripple effect of that change has yet to be felt.

For years, tax credits have helped bring investment to Montreal’s so-called Multimedia District. However, the decision to cut those incentives has left the city’s mayor perplexed, fearing that inward investment could now dry up and studios like this one struggling for business.

Video game studios are also offered similar incentives to base themselves in Canada. The aim is to attract investment, jobs and sustainable industries.

However, as provinces look to balance their budgets can tax incentives like these be justified? If they come to an end, will these filmmakers be quite so keen to come to Canada?

CCTV’s Kristiaan Yeo reports from Toronto.

Follow Kristiaan Yeo on Twitter @ThatsTheLatest