Government advisers, including those from the Progressive Democrats, were warned last year that easing stamp duty levels would be too costly and would actually increase house prices.
Economic experts from the Department of Finance advised that the Government "should refrain from introducing any new tax interventions affecting the housing market" in the December budget last year.
The advice was provided in a paper to the Tax Strategy Group, which meets regularly in the run-up to the budget and which includes Government special advisers from both the PD and Fianna Fáil as well as senior civil servants.
The paper states that the Government advisory body, the National Economic and Social Council, had suggested in 2005 that reform of the current stamp duty regime should be considered. The reforms considered and rejected last year were similar to those now being mooted by Tánaiste and PD leader Michael McDowell, such as increasing the stamp duty thresholds or introducing a banded system similar to income tax.
In its advice to the Tax Strategy Group, the experts said any of these changes "would involve very significant Exchequer costs, and are not seen as realistic options for the present".
They also said there would be "no guarantee" that changing rates or increasing thresholds would benefit house buyers because "there would be most likely some consequent increase in house prices".
The Department of Finance has begun another study on stamp duty, but there is no indication the department sees any merit in changing the current system.
Mr McDowell's intervention has led to concern in Fianna Fáil circles that stamp duty on residential property is generating billions in revenue that the Government does not need.
A Government spokeswoman said of the €2.7 billion expected to be raised in stamp duty this year, just a third - €900 million - came from residential property.
The expensive end of the market accounted for a third of the take from residential property. The take from first-time buyers was just €70 million.
Responding last night to questions on Mr McDowell's comments, Minister for Finance Brian Cowen said he was "respectful of everyone's ideas"
"These are issues which individual parties are considering. There were a number of options actually, as I understand it, considered by the Progressive Democrats at their think-in in Malahide. That's a matter for the future, and for them."
Fine Gael's finance spokesman Richard Bruton said if Mr McDowell was proposing to cut stamp duty he should say what taxes he was going to increase or what spending he was going to cut to pay for such a change. "Certainly stamp duty needs reform in a targeted way aimed at first-time buyers and older people who want to trade down."
Labour's spokeswoman Joan Burton said the Government had made a number of promises in relation to reducing the tax burden five years ago and had not fulfilled them. She warned that Mr McDowell's plan to cut stamp duty might drive prices up.