Victoria's racing industry has been given a $45 million boost and tax breaks on the eve of the Melbourne Cup to help it weather the costs of a licensing shake-up.

The state government windfall will help supply an $86 million infrastructure fund, with the industry chipping in the balance.

Racing has also been promised a 60 per cent tax break from 2012 - to compensate for lost pokies revenue under new licensing arrangements.

But racing chiefs say the tax cut is not enough and the opposition has accused the government of short-changing the industry.

Racing Minister Rob Hulls said the tax break would be reviewed in 2012 and the dual announcements would secure the multi-billion-dollar industry into the future.

"I think this will be the largest infrastructure spend in the racing industry's history," he said.

"This package will create something like 400 jobs, particularly in regional and rural communities and the government will be working very closely with the industry to select key projects of priority areas."

Target projects include drought-proofing and water-saving works, race track development and health and safety initiatives like improved running rails.

The projects will be carried out over the next two years.

Racing Victoria chief executive Rob Hines welcomed the funding boost and said the industry would fulfil its share of the deal.

But he expressed concern that the tax cuts were not enough to replace vital gaming machine revenue.

"We don't entirely agree with the tax rate that's been struck today, but the commitment for a review and a legislative review is a very positive one."

The government maintains racing will be no worse off under new 12-year licensing arrangements, starting in 2012, which will strip the industry of its 25 per cent cut of Tabcorp's poker machine profits.

To compensate, the parimutuel wagering tax rate will be cut from 19.11 per cent to 7.6 per cent, while the tax on fixed betting will drop from 10.91 per cent to 4.38 per cent.

"Over the course of the 12 years from 2012 the tax rate reduction will see approximately $1.3 billion of taxes flow to the industry," Gaming Minister Tony Robinson said.

But opposition racing spokesman Denis Napthine said the industry would be "dudded" out of up to $20 million a year.

"Under the current arrangements the electronic gaming machines would deliver over $100 million a year to racing post 2012 - this falls well short of that.

"Indeed, racing will be 10 to $20 million worse off under this package."

Mr Napthine said the shortfall would impact on prize money and threaten the growth of racing, which was vital to jobs and the state economy.