The Government is seeking alternative means of increasing duty from gambling to ensure stability of funding for horse racing, according to Brian Kavanagh, head of the sport's administrative body.

Earlier this week, an Economic and Social Research Institute (ESRI) paper argued that a reduction in the Exchequer's take from gambling meant that the State was subsidising horse racing, which a decade ago was a net contributor to the State's coffers.

The fall in duty, from €59 million in 2001 to €45.5 million last year, has forced the State to make up the difference in the Horse and Greyhound Racing Fund, which is tied to taxes on gambling and used to fund both sports. Horse racing last year received a total of €54.68 million.

The growth of tax-free online gambling forced the Government to cut taxes on off-course betting. Mr Kavanagh, chief executive of Horse Racing Ireland, said yesterday that Minister for Finance Brian Cowen was committed to seeking ways of making up the shortfall. "The Government is actively seeking ways of doing this and we are actively helping them," he said.

He pointed out that the paper identified a key problem for racing here, in that gambling is dominated by private companies, while in most other racing jurisdictions, the state has a monopoly on betting and uses this to fund racing. "For example, France controls a €600 million tote monopoly," he said.

Mr Kavanagh also said that the ESRI's paper effectively undervalued the sport's economic contribution because it ignored the breeding sector, which forms part of the same industry.

According to a 2004 report by Indecon economic consultants, breeding contributes €330 million a year to the general economy, and €37 million a year to the Exchequer.

An assessment of the ESRI paper by economist Paul Tansey, published yesterday, also argues that it is heavily biased by the exclusion of the breeding industry.