Minister for Finance Michael Noonan was warned by officials in his department that the introduction of a tax on sugar-sweetened drinks could drive soft-drinks multinationals out of the State.
The warning, which was given to the Minister prior to the Budget in October, is contained in documents released to RTÉ News under the Freedom of Information Act.
The documents show that the Revenue Commissioners also advised the Government not to introduce a sugar tax, claiming retailers would try to avoid it by crossing the border to purchase beverages in Northern Ireland.
Prior to the budget in October, Minister for Health Leo Varadkar wrote to Minister Noonan urging him to bring in a 20% tax on sugar sweetened drinks as a means of tackling obesity.
The measure was never introduced.
But the documents released to RTÉ News show that the Department of Finance was actively considering the proposal, and had done considerable research on its implications.
It found that a 25c increase on a litre of a commercial soft drink would add about 10c to the cost of a can of premium cola, and would raise an estimated €134m in additional tax for the State.
But the Department warned Mr Noonan that a reduction in consumption would hit soft-drink producers and small businesses and may also act as a disincentive for large soft-drink multinationals to locate in the State.
Officials also raised concerns about the impact on juice manufacturers and warned that a tax on soft drinks would offer no incentive for people to move towards sugar-free offerings on the market.
The Revenue Commissioners also opposed the measure, stating that the tax may cost more to introduce than it would raise.
In advice to the Department of Finance, the Revenue Commissioners said it "strongly recommends against introducing the tax" on the basis of the very high risk of tax evasion through the undeclared purchase of soft drinks in Northern Ireland for sale in the Republic.
Minister Varadkar said a 20% tax on sugar-sweetened drinks would result in a 1.25% reduction in obesity, which would be about 10,000 less obese adults.
