An industry report commissioned by Agriculture Minister Simon Coveney said the current structure of the Horse and Greyhound Fund could not be justified given the economic climate.
The Indecon consultants said funding needed to be replaced, and it supported the 1% duty on all turnover generated from bets based with indigenous or offshore bookmakers.
The report said if a duty was applied to all of the €4.6bn worth of bets laid by Irish punters, it would almost eliminate the need for a taxpayer subvention.
Continuing to put €29m into the industry, on top of the income from the existing betting levy, was not right, the report claimed.
“Indecon believes that given the current state of the public finances, providing this level of funding from general exchequer resources for the sector is not sustainable over the medium term,” it said.
The Government recently published betting legislation to bring offshore operators into the duty net through a licensing regime.
After publishing the report, Mr Coveney said he could foresee a situation where the horse racing industry did not require support independent of the duty. However, until then, the greater the revenue from betting tax, the stronger his hand would be as he looked to secure exchequer support for the sector, he said.
Mr Coveney added that it was important the industry be properly funded to ensure it competes with the best in the world.
The report said €727m was given to the Horse and Greyhound Fund since the duty was slashed in 2002. This led to an effective state subvention of €265m over the period, once the betting duty was factored in.
The report said the investment had helped in the success of a large industry but there were worrying signs. The prize money on offer at Irish races had fallen by 26% in recent years and was a cause for “serious concern”.
The consultants said there also needed to be greater openness in the industry.
It said the Government needed to take a greater role in ensuring Horse Racing Ireland was accountable for the money given to it.